For prospective homebuyers looking to settle in their first home, the housing market is still ruthless in America’s most populated cities.
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According to a new report from real estate news platform Point2, the once-standard starter home has become “the stuff of myths and legends — the actual unicorns of the real estate market,” the site reported.
Starter homes, defined as the first home a buyer can purchase, tend to be smaller and more affordable than others on the market.
Back in the 1940s, 70% of new homes were starter homes, according to Point2, which then shrunk to 40% in the ’80s and shrunk even further to 7% by 2019.
“More elusive than ever, this type of home seems almost extinct,” the report noted. “Further proof that starter homes are vanishing is their changing definition: They used to be the small, super-affordable houses that a young person or family could buy to get on the property ladder. But now, they’ve come to represent simply the cheapest homes available in a market, or homes that fall within the 5th to 35th percentile price range.”
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To further assess the shrinking market for starter homes, Point2 analyzed the median price of a starter home and renter households’ median incomes in the 50 largest U.S. cities to determine where starter homes are still affordable.
The results are sobering, to say the least.
In October, renters in New York only earned 34% of the income they would need to buy a starter home, and in 13 of the 50 cities, average renters earned less than half of what would be required to afford their first house.
Not only are paychecks not keeping up with inflation, but rising mortgage rates have made buying a home nearly impossible for some buyers. In San Francisco, the average household income was $100,715, but the amount needed to cover mortgage payments was $251,190, according to the data.
Still, starter homes are not totally extinct. The report found that four of the cities analyzed still have affordable starter homes for prospective buyers.
In Tulsa, Detroit, Memphis and Oklahoma City, the average renter earns more than what they would need to purchase a starter home. Additionally, the median starter home costs under $200,000 in each of the four cities.
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