2018-06-06 / Real Estate

Where are the starter homes?

First-time buyers scour the suburbs for older homes

Since the late 1940s, the simple, unadorned starter home in the suburbs has represented a first step toward the American Dream.

Yet today’s first-time buyers are facing a different reality than that of previous generations. Newly built starter homes – generally defined today as under $250,000 and purchased by buyers in their late 20s or early 30s – are few and far between.

From World War II through the close of the last decade, builders had access to large quantities of land, labor and materials. As the recession took hold a decade ago, homes declined in value, but land didn’t. Combined with rising proffers and connection fees, many developers began focusing their resources on pricier, high-profit homes.

As the market improved in the last couple of years, the trend continued. While Chesterfield leads the region in new home building, builders are primarily focusing on upscale buyers – leaving many first-time homebuyers with limited options.

“First-time homebuyers are being squeezed out of the market,” says Laura Lafayette, chief executive of the Richmond Association of Realtors. “The problem right now is that we don’t have enough inventory.”

Tom Tyler, director of housing markets for Integra Realty Richmond, agrees that the Richmond housing market is bottled up.

“We’ve tracked active listing counts since 2007, and in 2017 they reached the lowest point of that multi-year period, so inventory is really tight right now,” he says.

With the limited inventory of new starter homes, older suburban homes have become increasingly popular with first-time buyers – particularly young families. While cities like Richmond are the preferred choice for many millennials seeking walkability and an urban setting, the housing stock is limited and more expensive. Chesterfield, by contrast, has more options and a strong reputation for quality schools.

Steve Haasch, a planning manager for the county, says younger families are increasingly moving into older areas of the county along the Route 288 corridor, attracted by cost and connectivity. Bon Air, for instance, is enticing young families for its village setting, small lot size and ease of access to both Richmond and western Henrico.

“That’s what we’re finding,” Haasch says. “The city is becoming very difficult to afford for single-family ownership. City prices are getting pretty high.”

Brandermill is also an example of an older suburb ripe for millennials. The neighborhood is similarly connected with nearby shopping, miles of walking trails and quick access to Hull Street Road, 288 and Powhite Parkway. “I really like Brandermill,” Haasch says. “The thing was designed in the mid-70s, [but] we’re still talking about it 50 years later.”

By Integra’s count, of the 14,779 existing home sales in the region last year, 34 percent, or 5,104 home sales, occurred in Chesterfield.

“Chesterfield in general has always been the best-performing county in the market that we cover here locally,” Tyler says. “The western part of the county, that’s where the vast majority of the activity is concentrated.”

Still, Haasch says the county’s eastern corridors, such as Ampthill, Bensley and Bellwood, are also seeing renewed interest from homebuyers.

“There’s some really nice homes in that area that we are seeing younger families move into, especially younger Hispanic families,” Haasch says. “They’re investing in those homes and bringing them back up to … modern standards.”

While millennials are still dealing with issues of affordability and carrying debt from college loans, there’s another, unexpected element hampering the availability of older starter homes: seniors who are aging in place.

According to Haasch, the familiar narrative of seniors moving to Florida or Arizona in their golden years isn’t as common as it once was. For some, it’s an issue of affordability; for others, it’s more about not abandoning the community where their friends and family reside. Instead, they’re often staying in homes they already own.

“They’re occupying a house that could be used for a younger family,” Haasch says. “That’s jamming up the system.”

It’s for this reason that Haasch says the county is trying to promote more senior-oriented housing. Still, affordability is a problem.

A study released this year from the Richmond Association of Realtors’ Partnership for Housing Affordability found that of the 9,000 local senior-occupied homes included in their analysis, some 71.8 percent of them were valued below $200,000.

For many seniors who own their home free and clear – or have interest rates that were locked in during the recession – either moving up or moving into a senior-focused community isn’t financially desirable.

“For the [real estate] market to work, we need people to move in, and we need people to move up,” Lafayette says. “The dominoes always float uphill in the real estate market.”

While an increase in senior housing might offer some relief to the starter home market, in the meantime, millennials will have to pounce on a good deal.

“If it’s under $250,000, you have to move quickly, because you likely are going to have to face multiple offers in that price range,” Lafayette says. “There’s a lot of competition.” ¦

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