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Why are starter homes disappearing?

Posted at 10:50 AM, Aug 26, 2015
and last updated 2015-08-26 10:50:23-04

When couples get married, they typically buy an inexpensive "starter home," then move up to a bigger home when kids and better jobs come along. Unfortunately, that starter home may be disappearing.

Back in the 1920's, buying a house was very different. Families could even buy inexpensive starter homes directly from the Sears catalog and have them delivered to their plot of land.

Today, you may not find much in your price range, according to a new report in Daily Columnist Bob Sullivan says builders are putting up two types of home:

1. Pricey, premium homes with lots of granite and 3 or more bathrooms.
2. Housing for families on government subsidies.

Daily Finance says the middle class starter home has all but disappeared.

Do you earn the current median family income in the US of $50,000 a year? That would translate, based on bank lending rules, to a new home for $125,000:  And, for the most part, homes in that price range don't exist.

And from the "Doesn't That Stink" file, the reason entry level homes are rarely built any more is that there's no profit in it. Due to labor and material costs, builders can't profit on homes priced under $200,000, the report says, except in areas with very cheap land.

That leaves renting or buying smaller, older homes as your best options.

But an older home built in the 1940's, 50's, or 60's often needs thousands of dollars in updating -- lime green bathrooms, anyone? -- squeezing home buyers even more.

One bit of good news: There gas been a move back to smaller new homes the past couple of years, which could offer new hope to some struggling families, so you don't waste your money.