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How To Track Down the Last Starter Homes in America

Feb 24, 2025

Finding a starter home in today’s housing market can seem like searching for a needle in a haystack.

Over the past five years, rapid home value appreciation, fierce competition, and high mortgage rates have made it tough for first-time buyers to break into the market. But there’s good news: The tide is turning.

“Starter home inventory has almost fully recovered relative to pre-pandemic, and actually represents a larger share of all homes compared to 2020,” says Hannah Jones, senior economic research analyst at Realtor.com®.

If you’ve been waiting on the sidelines of the housing market, now might be the time to jump back in. Here’s how to find the elusive starter home.

What is a starter home?

In the simplest terms, a starter home is exactly what it sounds like: someone’s first home. They’re best described as no-frills, affordable houses that help individuals and families get their foot in the door of homeownership.

When they originally hit the market in post-World War II America, they were mass-produced two-bedroom homes with one bathroom. Today, they can best be described as any small single-family home that is move-in ready with an affordable price tag.

That price tag is where things get tricky.

“Many of the homes that used to fall into [the starter home] category are now priced higher due to appreciation,” says Brett Johnson, a licensed real estate agent based out of Englewood, CO. “And the ones that do remain tend to need work, which can be a deal breaker for first-time buyers who don’t have the cash for renovations.”

With millennials well into the homebuying age and Gen Z entering the market, there’s no shortage of demand for these houses. So, where have all the starter homes gone?

Why builders hesitate to invest in starter homes

Those looking for answers about the housing crisis have looked first at the trends of new construction. There was a precipitous drop-off in the construction of new two-bedroom starter homes in the aftermath of the 2007–08 financial crisis.

While it might be easy to point fingers at builders, there’s a very good reason why there was such a sharp decline in the construction of small starter homes—and a steady uptick in larger ones.

“Labor and material costs are always an issue in the cost of housing,” says Ryan Starr, an architect based out of Bend, OR. “But there are a couple of often overlooked things that are much more influential in driving costs: land costs and infrastructure.”

Between 2012 and 2017, the price of residential land rose almost four times as fast as inflation, according to research from the Joint Center for Housing Studies of Harvard University.

As for infrastructure, existing properties that might be ripe for infill development—like adding an accessory dwelling unit for multigenerational living—are supported by outdated plumbing systems and electrical grids.

“In order to develop them … we need to replace and upgrade existing infrastructure one street at a time. These small infill projects can’t absorb that kind of cost, so they wither on the vine and are canceled,” explains Starr.

While these issues persist in larger homes, builders can spread expenses out over a larger area, resulting in a lower cost per square foot and a higher profit margin.

More headwinds for starter homes

But now, even large-scale home developments might be at risk, adding more pressure to the already strained starter home market. Proposed tariffs on essential building materials like lumber, aluminum, and steel risk driving up construction costs even further.

As the importers of these materials, builders must absorb these costs or pass them on to buyers—further reducing the supply of affordable, entry-level homes.

It’s time to bring back starter homes

Ironically, the starter home is an invention of a housing shortage. The originator, William Levitt, developed the concept to meet demand from World War II veterans, who were beginning the baby boom and had access to affordable mortgages through the GI Bill.

If we look to the children of this generation as a sign of what we gain from investing in affordable housing for America’s young families, the payoff is clear: Baby boomers now own 38% of America’s housing inventory and hold $83.5 trillion of wealth.

An investment in starter homes is an investment in the economic upward mobility of generations to come. But homebuilders will need help (and some big incentives) if they’re going to shoulder the burden of jumpstarting the American dream.

In Starr’s words, “Yes, labor and materials cost more, but they are not the be all, end all to this cost issue for housing. We need a fundamental rethinking of how we develop land and provide housing.”

How to find a starter home in your area

Even though they’re harder to find, starter homes are still out there. Here’s how to find them:

Step 1: Define your budget

Before you hit the market and fall in love with a home, set a budget. This will help you focus your search and save yourself from heartbreak.

Use an online mortgage calculator to estimate what you can afford based on your income, savings, and debt-to-income ratio.

Step 2: Get pre-approved for a mortgage

There’s still steep competition for starter homes, and having pre-approval shows sellers that you’re serious about buying. This can give you an edge in multiple-offer situations.

Contact several mortgage lenders or use online services to compare mortgage rates and loan amounts. Remember, even a slightly lower interest rate can save you thousands over the life of your mortgage.

Step 3: Search online

Use online listing services to explore available properties. To narrow your search, apply filters that align with your needs. These sample filters can help get you started:

Price range: ($200,000 – $350,000)
Property type: Single-family home, townhouse, condo
Bedrooms: 2
Bathrooms: 1

Refining your criteria will help you focus on homes that match your lifestyle and budget. Be sure to set up email alerts so you’re notified as soon as new properties hit the market. Timing is critical, especially in competitive areas.

Step 4: Collaborate with your agent

Your agent will be your greatest ally when searching for a starter home. It may be your first time on the market, but they’ve likely done this dozens or hundreds of times before.

Throughout the process, try to keep an open mind—your agent might suggest homes that don’t check every box but have the potential to become the perfect fit. Trust their knowledge of the local market, and don’t hesitate to ask questions about pricing trends, neighborhood amenities, and resale value.

Cities with the most starter homes in America

If you’re stuck looking for a starter home in your neighborhood, it might be time to move.

“Southern markets, such as Houston and Atlanta, boast high levels of starter home inventory, as well as prices below the national norm,” says Jones. “In general, small, affordable home inventory has built up significantly in the South, offering options for buyers hoping to achieve homeownership this year.”

These cities have the most starter homes for sale: