My wife and I always thought we'd buy a starter home and then upgrade to a nicer, more permanent one about five years later. But these days, I am hearing that fewer buyers are taking this route. Has this changed and, if so, why?
The concept of a "starter home" in which young families with lower incomes buy a smaller house in a middle-class area and then upgrade to a bigger house and potentially nicer neighborhood a few years later, may be becoming outdated in other parts of the country but it appears to still be alive and well, at least in some parts of central Arkansas.
"I think there are people out there, either single or young couples, who are still buying starter homes," says Katherine Melhorn, a Realtor with Janet Jones Co. in Little Rock. "I still work with those who buy their first little starter home," she says. "Although, some people may be buying them as investments to use as rental property.
"What I've observed, though, is that the prices of the starter homes have gone up," she says. The houses she sells are usually priced just under $200,000. "There might be a starter home for $195,000, which is a pretty nice price for a starter home."
While the square footage of the houses she sells in Little Rock's midtown areas, including the upscale Heights and Hillcrest, averages about 3,000 square feet, Melhorn says the first-time buyers she works with usually buy a house with footage ranging from 1,300 to 1,900.
She says that Little Rock, unlike some other parts of the country, offers a large housing inventory.
"I think here in Little Rock, people are back on their feet," she says. "I know there are parts of the country where a lot of people are still having to work two jobs but I think Little Rock is a little ivory tower where the market is back and prices are going up."
And, she adds, that while a few houses may linger on the market, others are swiftly sold.
"Little Rock may be extremely isolated compared to the rest of the country as a whole," Melhorn says. "But the market here keeps getting better each year."
But meanwhile, nationally, some of today's first-time homeowners are choosing to buy bigger houses and remain in them longer.
National studies and surveys indicate the combination of stagnant wages, tight housing inventory, and rising house prices have shifted the population of first-time buyers to those with higher incomes who are buying larger houses while those who would have bought cheaper houses 10 years ago now can't afford to do so.
A survey by Bank of America earlier this year showed that 75 percent of first-time buyers would rather skip the starter home and find a house that meets their present and future needs. Of those surveyed, 35 percent responded that their plan was to retire in their first house.
And the first-time homeowners who are able to buy are opting to stay put for as long as 10 years, according to research conducted by the National Association of Realtors. The association's research also reveals that while 80 percent of first-time buyers are still purchasing single-family houses, that number may decline if construction trends and economic pressures remain the same. One solution? Be willing to choose a condo.
Melhorn says, from her experience, the starter home is still a popular path for buyers in Little Rock.
"I think they are starting out at one level and in four years, they're moving up," she says. "There could also be those who've been renting for many years and decide to buy a larger home and just stay in it, but I think in Little Rock, the starter home is still a legitimate stepping stone."
Do you have a decorating or remodeling question? Send your question to Linda S. Haymes, Arkansas Democrat-Gazette, P.O. Box 2221, Little Rock, Ark. 72203 or email:
lhaymes@arkansasonline.com
HomeStyle on 09/10/2016