Starter homes were once bare bones and small with sale prices well within the reach of first-time buyers. They had small square footage and modest price tags. In 1980, 40% of the homes built were starters. By 2019, only 7% of homes built could be classified as starter homes, according to the U.S. Census Bureau.
In most major U.S. cities, the average rental household doesn’t make enough money to afford the cheapest home in the city’s market.
Of the 50 largest cities in the U.S., only four of them have what could be considered a “starter home” market: Detroit, Memphis, Oklahoma City and Tulsa. Everywhere else, there is a gap between the average rental household’s income and the income needed to afford the cheapest home.
In Denver, the problem is worse than anywhere but a handful of coastal cities.
In Denver, the average rental household only makes 50% of the income necessary to buy the city’s cheapest home.
The median Denver renter makes $53,420. The cheapest home available costs $433,502. With a 20% down payment, buyers would need to make $97,000 to $106,000 in income to be able to afford monthly payments at a 6% to 7% interest rate, not including the time it would take to save up $87,000 for a down payment.
The gaps in other cities vary according to both average wages and average housing costs. While Denver’s wages are higher than other cities, its housing costs are also among the nation’s highest.