Are Starter Homes Going Out of Style?

More millennials are foregoing starter homes in favor of renting for longer, due to factors like rising home prices, a desire for flexibility, and changing lifestyles, Business Insider reports.

Starter homes used to be seen as a great way for young people to stop spending money on rent, earn equity, and enter the housing market at a lower cost before buying a larger, more expensive home later on. However, recent reports have revealed that starter homes are not the great investment many people thought they were. In fact, some experts argue they may be a complete waste of money.

Public opinion of the housing market is at an all-time low among millennials. According to a 2018 study by Value Insured, a mere 61% of millennials believe buying a house is more beneficial than renting — that's a 22% decrease since 2016. Only 38% of millennials believe buying a home is a good investment, largely because they think home prices are too high.

Not only are starter homes not guaranteed to build equity, but they are becoming increasingly expensive. A 2018 report by Bloomberg found that the average price of starter homes in the US had hit a record high. Bloomberg reported that homebuyers needed "23% of their income to afford a typical entry-level home" in 2018, up from 21% the previous year.

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