What is a starter home?

A starter home is a small, inexpensive home suitable for first-time home buyers. The home may be in move-in condition, or it may need some tender loving care to make it livable. Either way, these are generally single-family homes that are considered good starting points for families or individuals purchasing their first home. Find out what price points the starter homes in your region are demanding by looking through your local Sunday paper (look for adds that say things like ‘‘needs TLC’’ and ‘‘good starter home’’), searching the Internet, or consulting with a local real estate professional. The concept of the starter home is simple: You buy a small, inexpensive home (typically when you’re single or recently married) with the intent of selling it within a few years. By that time, your income will have grown (allowing you to purchase a larger home), or you’ll need more space for a growing family. The idea works well for some, who improve the home and within a few years end up making money on the sale and ‘‘moving up,’’ and not so well for others, who outgrow the starter home too soon and end up losing money if the property hasn’t appreciated.
According to 2003 NAR Profile of Home Buyers and Sellers, first-time buyers were less likely to buy a detached single-family home than were repeat buyers. Instead, they more frequently purchased lower-cost, ‘‘starter homes’’ such as townhouses, row houses, or condos. A greater proportion of new-home buyers (82 percent) than buyers of previously owned homes (78 percent) bought detached single-family homes. Starter homes run the gamut from well-kept, cozy dwellings to fixeruppers and everything in between. From modern to antiquated, some homes may need a lot of work and effort to make them livable, while others may be small, yet livable. Don’t expect a lot of bells and whistles with these homes, which are often a good match for someone who is either handy with repairs and upgrades or willing to shell out a few bucks to have someone else do the work.
Starter homes are generally priced anywhere from $40,000 to $120,000 and up, depending on where you’re located in the country. It might be hard to find a starter home under $120,000 in a city like Miami, for example, but easy to find a $65,900 three-bedroom, two-bath home in Fargo, North Dakota. Prices on most of these homes have spiked in recent years, thanks to a new demand spurred on by the low mortgage interest rates of the 2000s, but there is still a category of homes that are thought of as perfect choices for first-time home buyers.