Why starter homes are disappearing

Don't Waste Your Money

When couples get married, they typically buy an inexpensive" starter home," then move up to a bigger home when kids and better job come along.

Back in the 1920's, families bought inexpensive starter homes directly from the Sears catalog, and had them delivered to their plot of land.

In the 1950's, 2 bedroom Cape Cod homes popped up across the country, as starter homes for World War II servicemen and their families.

Unfortunately, that starter home may be disappearing.

New Homes Pricier Than Ever

Have you seen all the new homes going up lately, since the market recovered from the 2010 downturn?

But when you start looking, you may not find much in your price range, according to a new report in Daily Finance.com

Columnist Bob Sullivan says builders are putting up two types of home:

      1. Pricey, premium homes with lots of granite and 3 or more bathrooms.
      2. Housing for families on government subsidies.

Daily Finance says the middle class starter home has all but disappeared.
Do you earn the current median family income in the US of $50,000 a year?

That would translate, based on bank lending rules, to a new home for $125,000:  And for the most part, they don't exist.

Why No Cheap New Homes?

And from the "doesn't that stink" file, the reason entry level homes are rarely built any more: there's no profit in it.

Due to labor and material costs, builders can't profit on homes costing under $200,000, the report says, except in areas with very cheap land.

Live anywhere near a city and you'll say "doesn't that stink?"

That leaves renting or buying smaller older homes as your best option.  

But an older home built in the 1940's, 50's, or 60's often needs thousands of dollars in updating (lime green bathrooms, anyone?), squeezing home buyers even more.

One bit of good news: Theres been a move back to smaller new homes the past couple of years, which could offer new hope to some struggling families, so you don't waste your money.


Don't Waste Your Money is a registered trademark of the EW Scripps Co.

"Like" John Matarese on Facebook

Follow John on Twitter (@JohnMatarese )

Sign up for John's free Newsletter delivered weekly to your inbox

Click here for more DWYM reports and to contact John

Print this article Back to Top