Starter home
Encyclopedia
A starter home or starter house is a house
that is usually the first which a person or family can afford to purchase, often using a combination of savings and mortgage
financing. In the real estate
industry the term commonly denotes small one- or two-bedroom houses, often older homes but sometimes low-cost new developments. The concept originated in the United States during the post-World War II era when entry-level home ownership
was a preferred option for young families and regarded as part of the American Dream
.
The original concept of a newly built starter home outside of the city has changed due from both the end of low-cost land development and the changing preferences of successive generations in the United States. Since the end of the 20th century, more new homeowners are seeking different kinds of housing such as a condominium
or older existing home.
outer suburbs. The American Dream of a new-build single-family home on a previously unused lot
continues to move further out of urbanized areas to capture the lowest cost land. However as many areas in the nation experience urbanization
in multiple clusters, states such as California experience diffused land economics where no low-cost land exists. This has caused many real estate developers to either develop many low-cost townhomes densely or large single-family homes at high sale prices. The latter is frequently chosen resulting in starter-homes continuing to favor people in upper income brackets as the majority of a metro area's suburbs approach build-out and the distance to work ratio approaches a maximum. Factors that influence developers include land prices, perceived value, market demand, city planning law, construction costs, and maintaining profit margins.
For the buyer's end, changing financial requirements and mortgage interest rates as low as half a percentage point may affect large groups of income brackets to not be able to finance market-determined affordable housing in the long-term. Personal income for individuals and families have also not kept up with market inflation and cost of living to overcome this. While starter homes may be considered affordable based on income, the true cost of home ownership has historically not been reflected in actual financing.
, such as New York City
, San Francisco
, London
, or Shanghai
, it may be impossible for first time home buyers to find starter houses close to the city center. To assist such home buyers, local authorities such as that in Santa Cruz, California
, have re-zoned
previously commercial areas for residential housing specifically to allow developers to build starter homes. The Wall Street Journal
tracks median home purchase prices of starter homes as part of its real estate index.. Cities, whether suburban or the central core, have generally moved to a trend of master planned communities where large tracts of land are set aside for one complete build-out in order to maintain low costs to the developer and provide essential affordable and entry-level housing. Commercial and retail components are almost always included in these starter home communities.
House
A house is a building or structure that has the ability to be occupied for dwelling by human beings or other creatures. The term house includes many kinds of different dwellings ranging from rudimentary huts of nomadic tribes to free standing individual structures...
that is usually the first which a person or family can afford to purchase, often using a combination of savings and mortgage
Mortgage loan
A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan...
financing. In the real estate
Real estate
In general use, esp. North American, 'real estate' is taken to mean "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; an item of real property; buildings or...
industry the term commonly denotes small one- or two-bedroom houses, often older homes but sometimes low-cost new developments. The concept originated in the United States during the post-World War II era when entry-level home ownership
Owner-occupier
An owner-occupier is a person who lives in and owns the same home. It is a type of housing tenure. The home of the owner-occupier may be, for example, a house, apartment, condominium, or a housing cooperative...
was a preferred option for young families and regarded as part of the American Dream
American Dream
The American Dream is a national ethos of the United States in which freedom includes a promise of the possibility of prosperity and success. In the definition of the American Dream by James Truslow Adams in 1931, "life should be better and richer and fuller for everyone, with opportunity for each...
.
The original concept of a newly built starter home outside of the city has changed due from both the end of low-cost land development and the changing preferences of successive generations in the United States. Since the end of the 20th century, more new homeowners are seeking different kinds of housing such as a condominium
Condominium
A condominium, or condo, is the form of housing tenure and other real property where a specified part of a piece of real estate is individually owned while use of and access to common facilities in the piece such as hallways, heating system, elevators, exterior areas is executed under legal rights...
or older existing home.
Changes in the 21st century
In the United States, as real-estate market conditions continue to inflate and rise in major and medium cities where growth is fast, many starter homes are only affordable or available in metropolitan areaMetropolitan area
The term metropolitan area refers to a region consisting of a densely populated urban core and its less-populated surrounding territories, sharing industry, infrastructure, and housing. A metropolitan area usually encompasses multiple jurisdictions and municipalities: neighborhoods, townships,...
outer suburbs. The American Dream of a new-build single-family home on a previously unused lot
Lot (real estate)
In real estate, a lot or plot is a tract or parcel of land owned or meant to be owned by some owner. A lot is essentially considered a parcel of real property in some countries or immovable property in other countries...
continues to move further out of urbanized areas to capture the lowest cost land. However as many areas in the nation experience urbanization
Urbanization
Urbanization, urbanisation or urban drift is the physical growth of urban areas as a result of global change. The United Nations projected that half of the world's population would live in urban areas at the end of 2008....
in multiple clusters, states such as California experience diffused land economics where no low-cost land exists. This has caused many real estate developers to either develop many low-cost townhomes densely or large single-family homes at high sale prices. The latter is frequently chosen resulting in starter-homes continuing to favor people in upper income brackets as the majority of a metro area's suburbs approach build-out and the distance to work ratio approaches a maximum. Factors that influence developers include land prices, perceived value, market demand, city planning law, construction costs, and maintaining profit margins.
For the buyer's end, changing financial requirements and mortgage interest rates as low as half a percentage point may affect large groups of income brackets to not be able to finance market-determined affordable housing in the long-term. Personal income for individuals and families have also not kept up with market inflation and cost of living to overcome this. While starter homes may be considered affordable based on income, the true cost of home ownership has historically not been reflected in actual financing.
Efforts to increase availability
In locations with a lack of affordable housingAffordable housing
Affordable housing is a term used to describe dwelling units whose total housing costs are deemed "affordable" to those that have a median income. Although the term is often applied to rental housing that is within the financial means of those in the lower income ranges of a geographical area, the...
, such as New York City
New York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
, San Francisco
San Francisco, California
San Francisco , officially the City and County of San Francisco, is the financial, cultural, and transportation center of the San Francisco Bay Area, a region of 7.15 million people which includes San Jose and Oakland...
, London
London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
, or Shanghai
Shanghai
Shanghai is the largest city by population in China and the largest city proper in the world. It is one of the four province-level municipalities in the People's Republic of China, with a total population of over 23 million as of 2010...
, it may be impossible for first time home buyers to find starter houses close to the city center. To assist such home buyers, local authorities such as that in Santa Cruz, California
Santa Cruz, California
Santa Cruz is the county seat and largest city of Santa Cruz County, California in the US. As of the 2010 U.S. Census, Santa Cruz had a total population of 59,946...
, have re-zoned
Zoning
Zoning is a device of land use planning used by local governments in most developed countries. The word is derived from the practice of designating permitted uses of land based on mapped zones which separate one set of land uses from another...
previously commercial areas for residential housing specifically to allow developers to build starter homes. The Wall Street Journal
The Wall Street Journal
The Wall Street Journal is an American English-language international daily newspaper. It is published in New York City by Dow Jones & Company, a division of News Corporation, along with the Asian and European editions of the Journal....
tracks median home purchase prices of starter homes as part of its real estate index.. Cities, whether suburban or the central core, have generally moved to a trend of master planned communities where large tracts of land are set aside for one complete build-out in order to maintain low costs to the developer and provide essential affordable and entry-level housing. Commercial and retail components are almost always included in these starter home communities.
See also
- First time home buyer grantFirst time home buyer grantA first-time home buyer grant is a grant specifically for/targeted at those buying their first home — perhaps a starter home.Like other grants, the first-time buyer does not hold an obligation to repay the grant....
- First time buyerFirst time buyerA first-time buyer is a term used in the British and Irish property markets, and in other countries, for a potential house buyer who has not previously owned a property....
- Urban geographyUrban geographyUrban geography is the study of areas which have a high concentration of buildings and infrastructure. These are areas where the majority of economic activities are in the secondary sector and tertiary sectors...
- Second homeSecond homeSecond home may refer to:* Vacation property* Pied-à-terre* Second Home , an album by Marié Digby...