Thursday, March 24, 2016

The Incredible Vanishing Starter Homes

There are fewer affordable starter homes in 95 of the 100 largest U.S. markets now compared with 2012, according to the real estate research company Trulia defines a starter as a home that is in the lower third of a market’s valuation and affordable to those making the median income in that market.

What's going on?

According to Ralph McLaughlin, chief economist with, investors bought many foreclosed homes that were likely starter homes during the recession and turned them into rentals, thus keeping them off the sales market. (Note: I reported in the EPJ Daily Alert on these large investors coming into the market in 2012 and urged those considering buying to do so then.)

In 2016, the median starter home list price was $154,156, and a buyer would need to dedicate 37% of his income just to afford it, compared with 32% in 2012, Trulia said.

Those living in Oakland, Calif. may be at the epicenter of the madness.

Home buyers in that city, where the Black Panthers once roamed, would have to spend nearly 70% of their income to afford a 30-year fixed-rate mortgage on a starter home.

There is good news, however, if you live far away from a Fed money pumping spigot.

Markets with starter homes that are affordable for millennials and other first-time buyers — where as little as 5% and no more than 20% of median income is needed to afford a mortgage — do exist,

Some of those markets include Kansas City, Missouri (17% of median income required for a mortgage), Little Rock, Ark. (17%) and Memphis, Tenn. (15.6%), the report noted.


(Chart and dat originally from Trulia)

(via MarketWatch)


  1. Unfortunately the areas far from Fed spigots don't exactly have vibrant job markets, particularly for young professionals. This is anecdotal, but I feel that America is being divided into two types of regions: areas with plenty of job opportunities but have expensive housing, and areas with inexpensive housing but have few job opportunities. Either way, the middle class gets squeezed. Even the difference between the San Francisco Bay Area and the Central Valley is stark; the Bay Area has wonderful jobs but outrageously priced housing, and the Central Valley has relatively cheap housing but relatively few non-agricultural jobs. The Fed's inflation combined with the NIMBYism that has permeated the Bay Area for over 40 years have made the housing problem here an enormous one. I could leave, but the other places with jobs in my field have the same structural problems as the Bay Area, except they are still cheaper as of now.

  2. Condo prices are up 21% from last year in Seattle.