Jun 1, 2024 - Real Estate

Starter homes are becoming 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

House hunters aren't the only ones frustrated by this market. Homeowners stuck in close quarters are also feeling the squeeze.

Why it matters: With prices and mortgage rates still high, your starter home could become your forever home.

What they're saying: Nikki Rheude's family of four, plus their two cats, one dog and four chickens, are hunkering down in the 1,500-square-foot Coon Rapids home she bought in 2017.

  • "I used to have the mentality of keeping the house neutral, 'because it's easier to sell.' Now I have the mentality of designing a home that will make me happy, because I am going to be here for a while," Rheude tells Axios.

She converted the dining room into a third bedroom and finished the basement to make more space for her 11- and 12-year-old children's belongings.

State of play: First-time buyers are making up a growing share of home purchases, while current homeowners stay put.

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

The big picture: More clients are opting to renovate the space they have, instead of upgrading to a larger home, says Shamika Lynch, who designs tiny interiors nationwide.

  • Some are packing multiple functions in each space.
side by side of a platform that is empty underneath and covered with a tablecloth
Do-it-yourself sleeping quarters. Photo: Courtesy of Victoria Fritz

Zoom in: No separate sleeping area is no problem for Victoria Fritz, who owns a 367-square-foot St. Paul studio.

  • She slumbers under a platform that doubles as a Thanksgiving buffet-sized dining table.
  • "My original plan was to slide my bed under it, and slide it out to sleep. But it was 2021 and IKEA didn't have the bed in stock that I wanted," Fritz tells Axios.
  • Family members helped build the platform, which allows her enough space to sit up, but not stand.

Between the lines: Smaller homes are in demand as households shrink, people have kids later in life and housing costs soar, Axios' April Rubin reports.

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