Starter Home Market Improves in Select US States

The availability of starter homes, defined as properties appealing to first-time buyers, is beginning to improve in certain U.S. regions, according to a new report from Realtor.com. This marks a shift from the significant shortage experienced in recent years, which peaked in 2022. Nationally, the number of homes listed under $350,000 has decreased by approximately 300,000 since the summer of 2019. At that time, about 55% of all listings fell below this price point, a figure that has since dropped to 37.6%.

Despite the overall national decline, the market has seen a recovery since its 2022 low. Approximately 220,000 more starter homes priced below $350,000 have been added to the market since that period. The improvement is not uniform across the country, with buyers in the South and West experiencing more favorable conditions. The South has seen a substantial influx of 170,000 starter homes since 2022 due to increased construction, leading to price improvements of around 3.5% in that region.

In the West, starter home listings have decreased by 7% from their 2022 highs, offering some relief to buyers. Specific cities like Denver, Colorado Springs, and Phoenix are noted as benefiting from these trends. However, highly expensive West Coast metropolitan areas such as Los Angeles and San Francisco are not exhibiting similar affordability improvements for first-time buyers. Realtor.com Senior Economist Hannah Jones indicated that while higher interest rates have previously limited homeowner mobility, the "lock-in effect" is showing signs of weakening as life events increasingly compel owners to move, gradually increasing market supply.