It’s becoming a buyer’s market. But starter homes are still scarce : NPR

ELISSA NADWORNY, HOST:

For the first time in years, the real estate market is showing signs of change. Bidding wars are starting to ease and mortgage rates are showing signs of falling. So we took this opportunity to reach out to listeners and readers to find out what questions they might have about buying a home. And we’ve gotten a lot of questions about affordability, like this one from Gabriel Visi(ph). He lives near Austin, Texas, and has adult children looking for their first home. But they can’t find anything in their price range.

GABRIEL VISI: Why don’t they have the opportunity to buy the first houses, the two bedrooms that are exactly what they need, instead of a three or two or four or three house for $400,000 to $500,000?

NADWORNY: Why is it so hard to find these starter homes right now? NPR’s Scott Neuman covered this topic and he joins us now. Hello Scott.

SCOTT NEUMAN, BYLINE: Hello, Elissa.

NADWORNY: So, Scott, tell us about what’s happening in Austin, Texas, and why it’s so difficult to afford a starter home there.

NEUMAN: Yes, Austin is one of the fastest growing metropolitan areas in the country, which has really energized the real estate market. It became kind of an example of the lack of starter homes. There are plenty of expensive places, but few are geared toward a single person, couples, or a family just starting out. The median income in Austin is around $134,000. This would typically qualify you for a mortgage at that sweet spot within the starting home run of around $350,000. But that’s not enough in Austin. I talked to Scott Turner (ph), who is a home builder in the Austin area.

SCOTT TURNER: The median home price in the city of Austin in July was 590,000. So if you’re at a median income, you know, in the area, you can’t afford to buy a house in the city of Austin.

NADWORNY: What could be contributing to this shortage of starter homes in Austin?

NEUMAN: Well, Turner says it’s also about overly restrictive zoning and land use regulations.

TURNER: For a city like Austin, we have a lot of what’s called exclusionary zoning, which means you’re not allowed to build housing in the vast majority of downtown. The last time Austin updated its land use code, the rules that determine where you can put housing, was in 1984.

NEUMAN: Turner says Austin has known for decades that it needs to change these rules. And they tried. But many existing homeowners don’t want more density, especially duplexes, triplexes and fourplexes. And they sued the city to block that.

NADWORNY: So we talked about Austin, but is this a nationwide problem?

NEUMAN: That’s true. I spoke to Mike Loftin, the CEO of Homewise. This is a non-profit organization based in New Mexico that helps people buy their first home. Loftin agrees that zoning and land use are obstacles, but it’s about something else, too. Loftin says luxury homes are much more profitable for builders, so smaller homes simply aren’t built. He compares Austin to Albuquerque, the largest city in New Mexico.

MIKE LOFTIN: Ten years ago in Albuquerque, between 2014 and 2018, about 20% of all new homes built were considered entry-level homes, smaller, more affordable homes. Today, that figure is 4%. And this is true across the country. People and home builders just don’t build that entry level home.

NADWORNY: OK, so what options are available to potential first-time home buyers?

NEUMAN: Turner says real estate agents have this expression: Drive until you’re qualified. Simply put, if you can’t afford a house in the city, keep moving farther away until you find something you can’t afford. In the Austin metropolitan area, for example, there is the city of Bastrop. It’s just over 30 miles southeast of Austin, and the median home price there is much more reasonable, around $350,000. This might be a bit of a commute if you work in the city, but for a first home it could be worth it.

NADWORNY: This is NPR’s Scott Neuman. Thanks, Scott.

NEUMAN: Thank you.

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