The starter home trend could possibly be fading in real estate. Before the housing bubble, first-time buyers with average incomes would look for a less expensive, smaller house with the idea of moving on to a larger home within a few years. Today’s first-time buyers want a home that suits their requirements now as well as in the future. 75% percent of first-time buyers say they prefer to skip the starter home and locate a home that meets their long-term needs, as outlined by a survey commissioned by Bank of America in early 2016. 35% say they even plan to remain in that home until they retire.
First-Time Buyers Not Buying Starter Homes
First-time buyers nowadays are typically higher earners, because of rising home values and tighter housing inventories. Therefore, these higher earners desire fancier homes.
In 2013, first-time buyers purchased homes with an average of 1,845 square feet. The typical home in the U.S., meanwhile, is just 1,819 square feet, according to BuildZoom, a real estate construction firm’s analysis of data from the Census Bureau.
“So those home buyers who probably would have been looking for the lowest-end homes 10 years ago during the housing boom are today just not able to buy. And those that are able to buy are looking further upmarket,” says Issi Romem, chief economist for BuildZoom.
Many first-time buyers aren’t planning to upgrade and move on in five years, like previously. They intend to stay put.
“When they do purchase, they’re planning on living there longer than buyers that we’ve seen in the past,” says Jessica Lautz, NAR’s managing director of survey research. “They’re expecting to live there 10 years.”