YOUNGSTOWN, Ohio – Mahoning Valley real estate professionals contend that reports of the demise of the starter home have been greatly exaggerated.
Some national and industry publications have reported that starter homes are a thing of the past, a victim of low inventory, higher mortgage rates and steeper costs.
“I think it’s a strong opinion, saying that it’s a thing of the past,” says Sue Filipovich, owner of Burgan Real Estate and a real estate agent. “Because I think what it is is that it’s shifted to a little bit higher, along with the appreciation of homes. The starter home entry level price has shifted up and adjusted to where we’re at right now with home prices.”
The Mahoning Valley’s housing inventory is older, and many houses require updating. But many people looking for a starter home aren’t willing to put in the work to do that, she says.
“Those homes are needing wallpaper and flooring and maybe a new roof and mechanicals,” Filipovich explains. “A lot of them have original furnaces – they’re probably really good furnaces – and all that costs money, so if an entry level, first-time homebuyer doesn’t have the cash, then that does make it more difficult for them to get into it, and needing more help from sellers to have those things as part of the contract.”
When a starter home that requires little to no work comes on the market, it sells fast, she says.
Older Buyers
And first-time homebuyers are older than in the past.
“I think the average first-time homebuyer age has skyrocketed,” says Michael Stevens, real estate agent and owner of Coldwell Banker EvenBay Real Estate. “It used to be 28. It’s now all the way up to, like 40-41 years of age which is crazy.”
He referred to a recent meeting where panelists talked about how students graduating from college don’t view home ownership as something that’s attainable for them. Waiting to buy a home means people are renting longer than previous generations and rent prices have risen too, Stevens points out.
Inventory and increasing prices contribute to the problem for first-time buyers, Stevens says. He’s been in the real estate industry for 30 years. The price of a starter home used to range between $75,000 and $125,000.
“Now the homes that are coming on the market that are halfway decent and desirable are $150,000 to two and a quarter,” Stevens says.
He agrees with Filipovich that much of the Valley’s housing stock needs updating or rehabilitation, but many either are unable to do the work themselves or unwilling to pay a company to do it.
“And so we really are spinning our wheels because we’re showing that buyer a product that they don’t really want, and we’re looking for a product that doesn’t exist,” Stevens explains.
Affordability
Trisha Howe, executive officer of the Homebuilders and Remodelers Association of the Mahoning Valley, acknowledges that prices of starter homes and homes in all categories have increased. But homes in the Valley are much more affordable than in other regions and states, she says.
“And there are starter homes that you can start off with and then grow and sell,” Howe continues. “The market has been in high demand. Even though we have a low inventory, the market is still in high demand for new and first-time homebuyers. And there are a lot of different mortgage companies and banks that offer a lot of different, very nice and affordable packages that you can put together for those people.”
While costs have increased, houses enter the market for entry-level buyers.
“So I would say, in our area, yes, the starter home still exists,” Howe says. “Some of those may be where they are in a neighborhood that they’re just starting out in, and then growing into larger neighborhoods as their family grows as well as their income.”
Marlin Palich, a real estate agent with Berkshire Hathaway HomeServices Stouffer Realty, points out that incomes must increase for people to be able to afford the higher priced houses.
“If the price goes up and the interest rate is up, then, of course, those wages have to, accordingly, be up to help that person be able to obtain financing,” he says.
There’s a need for more affordable homes based on people’s income, Palich continues. “And we just don’t have those homes in that inventory.”
Education
But there’s a lack of education about home ownership too, he says.
“If I’m working with a new buyer in their first home – which I love to do – we talk about being fiscally responsible, having money put away if you’re buying a home that’s a little older,” Palich says.
There’s always something that could break and require a costly repair or replacement. People need to be educated about what’s involved in home ownership, he says. And there are programs available through local governments and banks that may help.
Stevens says the shortage spans all types of housing prompting discussions about ways to address the problem.
“We hear a lot of conversation about, what can we do to solve our inventory problem by building new homes and infrastructure costs and all that,” he says. “But guess what? That doesn’t even touch this buyer.”
The new construction market accounts for only about 15% of the market, Stevens adds. Most newly constructed homes cost roughly $400,000, too steep for first-time homebuyers who comprise the largest percentage of the market.
Stevens agrees about the need for education for people buying their first homes.
“I’ve talked about programs that we need to enhance,” he explains. “For this market, it’s educating them on buying a home that still has that grandma’s orange carpet, maybe pink tile bathroom walls.”
And programs are available such as rehab loans through financial institutions. “We’re putting together a program to try to target that market with education to that client and that consumer,” Stevens says.
There are loans available where a buyer may buy a house that’s the right size in the neighborhood they want but they have to have the vision to see what it can be with a rehabilitation project that’s structured into the loan.
Valley organizations have convened committees to address the housing shortage as companies, including Kimberly-Clark, move to the area and their employees need places to live.
“If we’re dealing with a lack of inventory today and we’re having population growth tomorrow, it’s going to be problematic,” Stevens adds.
Filipovich says it’s important for anyone planning to buy a home to work with a real estate agent who knows the market, can help them navigate the process and inform them about available programs.
“People think that it’s really easy. They watch the shows on TV and they [think they can] go in and make an offer on a house and buy it,” she says. “But there is a lot involved. There’s creative ways to do it and more options now than we’ve seen before.”
Those include buying a home in an area with tax abatements for a certain number of years. That includes both Youngstown and Columbiana. More people are taking advantage of those offerings, Filipovich says.
“That’s a way where we need to involve our local and state government to be able to offer more of those programs,” she says.
And she agrees there needs to be more education for homebuyers.
Still, the Valley’s market has advantages over other areas, Filipovich says.
“I think in our area, the Mahoning Valley, we’re still so affordable compared to the national markets,” she says. “As far as an advantage there locally, I don’t think we realize how good we do have it, because starter homes still exist here. But they do move fast.”
