Starter homes are scarce but homebuyers can improve their odds
Many first-time buyers are struggling to find affordable “starter homes,” as smaller, lower-priced houses are increasingly scarce in cities like Austin. Despite mortgage rates potentially dipping below 6% next year, the combination of rapidly rising home prices, high construction costs and a slowdown in recycling existing starter homes keeps many would-be buyers out of the market. Decades of declining construction of entry-level homes, once 40% of new builds in the 1980s, now only 12%, combined with zoning restrictions, lengthy approval processes and resistance from some existing homeowners, have made it difficult to increase supply quickly. Even with policy changes allowing more homes per lot, getting new affordable housing built can take years.
Local initiatives and support programs are helping to address the issue. Organizations like Homewise assist first-time buyers by improving credit, creating savings plans and offering low down payment options. Some states, such as Utah and New Mexico, are experimenting with subsidies and zoning reforms to encourage the construction of smaller homes. While these measures could gradually ease the shortage, prospective buyers may still need to compromise on size, location or amenities to find an affordable starter home in the near term.
