Starter Home Availability Improves in Select U.S. Regions

The availability of starter homes is beginning to improve in some parts of the United States after a multi-year shortage. A report from Realtor.com indicates that the supply of smaller, more affordable homes targeted at first-time buyers is increasing, but the situation remains uneven across different regions.

The scarcity of starter homes reached its peak in 2022, influenced by the pandemic-driven housing boom and historically low interest rates. Realtor.com data shows approximately 300,000 fewer homes priced under $350,000 are listed now compared to the summer of 2019. At that time, about 55% of listings fell into this price bracket, compared to 37.6% currently.

However, the market has added back roughly 220,000 starter homes priced below $350,000 since the low point in 2022. While the national picture is mixed, first-time homebuyers in the South and West may benefit from slightly reduced starter home prices compared to 2022 highs. The South, in particular, has seen construction add approximately 170,000 starter homes since 2022, improving buyer options and contributing to a roughly 3.5% price decrease in the region.

In the West, starter home listings have dropped by 7% from their 2022 peak prices, offering some relief to buyers. Cities like Denver, Colorado Springs, and Phoenix are showing signs of improvement. "Higher rates have kept homeowners stuck in place, but we're finally seeing cracks in the lock-in effect," said Hannah Jones, senior economist at Realtor.com. Life events are gradually prompting more owners to sell, increasing market supply.

Starter home prices continue to rise in the Midwest and Northeast. The Northeast is described as the "toughest market in the country" for first-time buyers, with smaller, more affordable homes becoming increasingly scarce.