For many years, a “starter home” was a term that defined how many home buyers approached home ownership. Consumers were expected to buy a smaller home at a younger age and later move to a bigger home as their income and family size expanded.
Although this trend made good sense in yesteryear, today’s real estate market is a different story altogether. Pressures and trends have led many home buyers to question the starter home trend and approach home buying differently. In fact, people are increasingly rethinking what a starter home even means, according to a Rocket Mortgage® survey.
Here are five reasons why home buyers today find that a starter home no longer makes sense.
1. Affordability of Housing Has Been Revolutionized
One reason that the concept of starter homes is falling by the wayside involves affordability. The truth is that even the smallest homes that can be considered entry-level today cost far more than what people would typically pay for starter homes in the past.
Today’s consumers find that buying any home means stretching their finances. When the price difference between a starter home and a bigger home isn’t all that much, many consumers choose to bypass the starter home altogether. Instead of buying a starter home and heading to greener pastures a few years later, consumers want to buy the best home they can afford now.
2. Transaction Costs Make Frequent Moves Unfeasible
Moving too often can fritter away any gains made through real estate investments. Closing a transaction, realtor commissions, attorney fees, moving expenses, and possibly capital improvements can add up quickly. It can be financially draining to follow the old trend of selling a smaller starter home and heading to a bigger home…often just to keep up with the Joneses.
For many consumers, having this process repeated several times is simply unfeasible financially. The resale of homes after only a few years of ownership may simply not give sellers enough opportunity to gain meaningful equity in their property, particularly in slower markets.
Consequently, home buyers have begun prioritizing properties where they can live longer. Rather than treating their initial home-buying experience as a stepping stone toward something better, home buyers have come to realize that long-term ownership makes for better investments.
3. Lifestyle Needs Are More Complex
The modern lifestyle does not easily align with the traditional assumptions of starter homes. Some individuals are working remotely or in hybrid roles, requiring an office space. Some individuals want adaptable floor plans for different living arrangements.
Starter homes are smaller in design and less flexible, which makes it difficult for them to meet these requirements. People look for houses that are scalable and adaptable, whether it’s for a new career, a growing family, or taking care of older relatives without having to move elsewhere.
4. Consumers Want Stability in an Unstable World
Economic uncertainty has also altered people’s perspectives on homeownership. The job markets are more dynamic now. It’s often unnecessary to relocate for new opportunities — given that telecommuting allows for more possible career opportunities remotely.
People who are already living in homes that satisfy most of what they want don’t want to pack up and move for no good reason. They want to find a place where they can focus on community, happiness, and financial sustainability rather than planning where to move next.
5. Emotional Value Trumped the “Property Ladder” Mentality
Homes are sometimes seen as stepping stones to financial success. But buyers today are more likely to perceive their homes as their sanctuaries. Feelings of satisfaction, happiness, and alignment with their ideals now greatly impact purchasing decisions.
People desire homes that are good investments. That’s a no-brainer, but they also want residences that are truly enjoyable. A home that is full of meaning and functionality may be more valuable to today’s home buyers than one that is seen as a means to an end.
The starter home phenomenon isn’t what it used to be. People aren’t looking to pay premium prices for short-term homes that often don’t allow them to recoup a good ROI. This generation of home buyers isn’t rejecting the idea of starting somewhere. It’s actually redefining what the idea of starting means. In other words, this generation wants more out of their homes.