If you are hunting for a starter home right now, where you look matters more than ever. A new report from Realtor.com shows that the number of affordable homes for first-time buyers has grown in the southern U.S. but slowed in the Northeast.
Homebuilders in Texas, Florida, and the Carolinas accelerated construction during the pandemic, and that extra supply is now hitting the market. Hannah Jones, the Realtor.com economist who wrote the report, put it simply: "Builders in Texas, Florida, and the Carolinas really responded to demand during the boom years of the pandemic, and that supply has come to market." She added that builders were "really taking advantage of the more permissive zoning laws and regulations in the South."
The Northeast tells a different story. Dense development and scarce land make new construction a headache. And as Jones noted, for some places, "There's just not as much space for the sprawl. You also run into the ocean." That geographic limit, combined with strict local rules, means fewer lots to build on.
You might expect more supply to mean more buyers jumping in. But that is not what is happening.
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Why the disconnect? High overall costs and income uncertainty are keeping people on the sidelines. Orphe Divounguy, a senior economist at Zillow, explained the hesitancy.
"It's very difficult for people to go out and commit to a new purchase when there's so much uncertainty about how far their incomes will go," he said. Even when a house looks affordable on paper, the math gets scary when you factor in mortgage rates, maintenance, and the risk of a job shift.
There is another force squeezing the market from the inside. Homeowners are staying put much longer than they used to. Real estate broker Sheryl Merritt, based in Raleigh, North Carolina, observes this daily.
"Years ago, the average time a person would stay in their house would be seven, 10, 12 years. We're seeing people stay in their houses for 20 years now," she said.
That nearly doubles the old norm. Why leave when you locked in a low mortgage rate a few years ago? Moving means giving up that rate for a much higher one, and that math often does not work.
Many prospective buyers are giving up on the concept of a starter home entirely. According to Realtor.com economist Hannah Jones, many buyers now prefer to purchase a lifelong residence and skip the starter home step entirely.
The current housing market is also shaped by persistently high interest rates and stubborn inflation, which have eroded purchasing power even in regions where supply has grown. While builders in the South have added inventory, elevated mortgage rates - now hovering near 7% - make monthly payments on even a $350,000 home prohibitive for many first-time buyers. At the same time, existing homeowners who locked in rates below 4% during the pandemic have little incentive to sell, compounding the scarcity of affordable listings. This combination of financial constraints and low turnover continues to stifle the entry-level segment, despite the regional differences in construction activity.
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