The cost of starter homes for young families across Southern California and the Bay Area has doubled and tripled within the last decade.
After a decade of bidding wars and rising home prices, stamping the first ticket to the American dream has become further out of reach, the Orange County Register reported, citing Redfin.
The median price for starter homes — considered the bottom 35 percent of all sales, less the very cheapest 5 percent that are likely too shabby to be suitable for first-time buyers — varies according to region.
From March 2012 through July, median starter home prices nearly tripled across the Inland Empire, and more than doubled in San Francisco.
Median starter home prices rose 264 percent to $400,000 in Riverside and San Bernardino counties; 188 percent to $700,000 in Orange County; and 171 percent to $583,000 in Los Angeles County.
In the Bay Area, starter prices rose 191 percent to $950,000 in Santa Clara and San Benito counties; and 120 percent to $922,500 for homes in San Francisco and San Mateo counties.
Such starter homes have become more difficult to find.
The minimum annual income needed to afford an entry-level home is now between $160,000 to $245,000 a year, even in the Inland Empire.
The share of first-timers who can afford to buy an entry-level house fell to 32 percent last spring, down from 66 percent in 2012. Entry-level houses were affordable to 33 percent of Southern California households and 28 percent of Bay Area households.
Starter home prices are rising faster than values for costlier homes, and are outpacing income growth. Median incomes during that period increased only 50 percent to 60 percent in Southern California and 60 percent to 80 percent in the Bay Area.
“First-time homebuyers are getting squeezed out,” agent Joseph Huelskamp of EXP Realty in Riverside told the Register. “They want to get out of those (high) rents and start … building equity. (But) the amount of inventory in an affordable price range is very low. Super low.”
One home type of particular interest to real estate investors is the starter home. In the first quarter, 41.1 percent of investor purchases were starter homes, a record. The buying trends of these more affordable houses are blocking first-time buyers from enticing starter homes.
— Dana Bartholomew
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