Jun 1, 2024 - Economy

Starter homes are turning into forever homes

A line chart that displays the quarterly share of first-time homebuyer mortgage applications from Q1 2021 to Q1 2024. The share starts at 11.56% in Q1 2021, peaks at 27.53% in Q1 2024, with noticeable increases in Q2 2021 and Q2 2022. The chart shows a general upward trend over the period.
Data: Maxwell; Note: Analysis comes from 300+ U.S. lenders; Chart: Axios Visuals

New buyers aren't the only ones frustrated by this market. Existing homeowners stuck in close quarters are feeling the squeeze, too.

Why it matters: Your starter home could become your forever home.

Zoom in: Leah Foreman and her husband bought a three-bed, two-bath Denver home in 2020. She's had a baby since then and says they're already outgrowing the house.

What they're saying: A bigger house isn't an option right now. "We wouldn't be able to afford to rebuy our current space. How would we move?" Foreman tells us.

In D.C., Cameron Hurley and her husband bought a two-bed, two-bath condo in the Atlas District 14 years ago. Their family has doubled in size since.

  • They've dreamed of a larger space but would have to leave the neighborhood to afford it.
  • Instead, the den became a bedroom, a wonky storage space became a half bath, and the living room is an everything room.

The big picture: First-time homebuyers are taking up a growing share of home purchases while current owners stay put.

  • Half of potential sellers are waiting for mortgage rates to come down before they list, per Realtor.com.
  • Roughly one-third of potential sellers have been thinking of moving for multiple years.

Shamika Lynch of Maximizing Tiny Interiors specializes in small-space design. There's been a noticeable increase in clients opting to renovate the space they have instead of upgrading to a larger home, she says.

  • To maximize minimal square footage, clients are packing multiple functions in each space. For example, one client is adding a bathroom to their existing layout to complete a guest suite (that may double as a nursery one day), Lynch says.

The intrigue: U.S. homes are getting smaller as households shrink, people have kids later in life and housing costs soar, Axios' April Rubin reports.

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