Why the Starter Home Is Disappearing in America

The idea of the traditional “starter home” — a modest, affordable place that helps first-time buyers build equity — is becoming increasingly difficult to find in today’s housing market, as builders and buyers confront rising costs, larger floor plans and shifting local regulations.

For decades, starter homes were commonly understood as smaller houses that might need renovation and were often intended as temporary stops before moving up to something larger. But that long-standing model no longer aligns with modern housing realities, where prices and home sizes have steadily climbed.

According to U.S. Census Bureau data, homes with four or more bedrooms accounted for nearly half of all new residential construction in 2022. In contrast, such large homes represented only about one in five new builds during the 1970s. The shift toward larger houses has brought higher construction costs, pushing prices further out of reach for many first-time buyers.

Federal data show the median U.S. home price now stands at $410,800, an increase of nearly $100,000 since 2019. Local zoning requirements and market pressures have encouraged builders to prioritize larger homes with higher profit margins.

“You have zoning requirements that have encouraged large lot sizes,” said Dennis Shea, a housing expert at the Bipartisan Policy Center. “Home builders, particularly in the wake of the Great Recession, where they were very negatively impacted, find it easier to build larger homes that have higher profit margins.”

Buyer expectations have also changed. Today’s new homes almost universally include at least two full bathrooms, a feature found in only about 60 percent of homes built in the 1970s. Multi-car garages have also become standard, with properties featuring space for three or more vehicles peaking at nearly one-quarter of new construction in 2015.

Those features add convenience — and cost — shrinking the supply of homes designed for entry-level budgets.

“It has become more expensive, almost financially not viable, to build what we thought was a starter home: a 1,000-square-foot home. They’re now incentivized to build million, million-and-a-half, two-million-dollar homes. That’s where the profit is for those builders,” said Christian Kosko, a D.C.-area mortgage lender who works with young buyers.

Even households earning upper-middle-class salaries are struggling to find affordable options in high-cost markets such as Washington, D.C., where the median home price approaches $700,000.

“They’re certainly out there. Are there a lot? Absolutely not. If it’s a $400,000 home, it’s older or it has a superexpensive condo fee, or it’s an area they don’t want to be in.”

The limited inventory often attracts intense competition from both buyers and investors. Kosko believes converting older rowhouses into multiple condominiums could help address the gap.

“Those are perfect. If we incentivize those in some way, it would solve a ton of that first-time home buyer size and payment.”

Recent trends suggest modest movement toward smaller homes. Census data show the share of newly built two-bedroom homes rose from 9 percent in 2022 to 12 percent in 2024, while construction of homes larger than 3,000 square feet declined.

“In 2022, when mortgage rates more than doubled, the builders started to build smaller. They tried to make the math work for potential home buyers,” said Zillow senior economist Orphe Divounguy. “But prices have increased so much, it’s still very difficult to afford a home, especially in markets that don’t allow for building on small lots. … When a builder goes in there and tries to actually build something that would sell in today’s market, they just can’t.”

Divounguy said zoning reforms could be key to reviving the starter home market.

“More and more local politicians [are] talking about wanting to do something to fix the housing affordability crisis. So you’ll start to see a wave of change happen across the country to fix this problem.”

Cities including Minneapolis, Salt Lake City and St. Louis have already loosened lot-size rules, while states such as Arizona, Utah, Texas and Colorado are exploring policies to encourage smaller homes.

For buyers like Sara Persechino of Hopkinton, New Hampshire, the challenge has been personal and exhausting.

“It’s been a long journey and it’s not ending where we thought it would,” she said. “We would show up to an open house and there would be dozens of cars. … They were packed.”

After roughly a dozen failed offers, Persechino and her husband purchased undeveloped land and decided to build instead.

“We were looking for a house that we could just move into,” she said.

Now, years later, their vision has shifted.

“We’re going to build just a small cottage, and it will be our starter home, now that we’re 37 and 40 years old, finally.”

At this stage, she added, that starter home may also be their last.

Redfin economist Chen Zhao said limited starter-home supply is compounded by homeowners holding onto low-interest mortgages, reducing resale inventory.

“If you’re already in the club, you have a ton of equity. If you were never in the club to begin with, it’s kind of dire,” Zhao said.

While sales of lower-priced homes have increased modestly, Zhao noted that first-time buyers today face tougher odds than previous generations.

“They got pretty unlucky.”

Originally reported by Julie Z. Weil in Washington Post.