First-time homebuyers may struggle to find adequate starter homes when the 2025 buying season begins this spring.
The homes that once gave Americans a stepping stone into real estate are disappearing, according to experts. While the exact definition of a starter home varies, they're typically under 1,400 square feet. In 2023, just 9% of the new homes built in the United States were under that size, according to Census Bureau data. In 1982, it was more like 40% of new homes.Experts say that restrictive zoning laws found around the country are to blame. These laws are set at the local level and dictate what can be built where.
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The death of the starter home sped up after the 2007-2008 global financial crisis as the homebuilder industry consolidated. The annual rates for new home construction remains well below those observed in the early 2000s and years prior."It is such an unusual market because we have an all-time low of first-time home buyers, but an all-time high of all-cash buyers," said Jessica Lautz, deputy chief economist at the National Association of Realtors.