First-time buyers flock to older homes as starter homes age out
The skyrocketing price of homeownership means that old and small is the new starter home, according to a new report from Cotality.
The 'new' starter home is old
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'The starter home has effectively aged out,' says the report's author, Cotality economist Thom Malone. 'First-time buyers are priced out by high mortgage rates or lack of supply.'
Nor are new builds generally geared toward the first-time buyer, unless that buyer happens to have a lot of money.
'Land costs, building material prices, and a persistent lack of housing supply has transformed new builds into high-end housing—even in more affordable regions of the U.S.,' he says.
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Additionally, new developments often require a cash deposit of up to 20% of the full price. Given today's prices, that could be a bundle—more than a younger person can afford.
While sales of older homes have always outstripped newer ones, given that there are so many more of them, sales of existing homes are down 2% year over year, while new-home sales are down 3.43%, says the Cotality report.
5 The skyrocketing price of homeownership means that old and small is the new starter home, according to a new report from Cotality.
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Roughly 70% of existing homes have less than the average 2,000 square feet of space that is common in new construction, indicating that many buyers are forgoing extra space in favor of a lower price tag, according to the report. (For this analysis, a starter home is defined as having a maximum of 1,500 square feet.)
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Even smaller new homes can still be pricey—Cotality data shows the median price of a newly built home in April 2025 that's less than 1,500 square feet was $320,000.
While this is less than the June median national price tag of $440,950, according to Realtor.com®, it is pricier than what was available before the COVID-19 pandemic. In April 2019, the median price tag was $310,000.
Real estate agents agree that more clients are asking for older homes. While affordability is key, there are other reasons as well.
'I have seen buyers opt for older homes in more established areas versus new construction because they don't want to live in a cookie-cutter neighborhood where all of the homes look the same, there are no trees or mature landscaping and certainly deal with all of the hassle that comes with living amongst new construction being built all around them,' Cara Ameer, a real estate agent with Coldwell Banker who is licensed in Florida and California, tells Realtor.com.
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Lot sizes tend to be larger with older homes, as well, she notes. 'Builders squeeze everything on 40- to 60-foot-wide lots, and you pay a premium to have some sort of view versus backing up to other homes.'
'I'm seeing a noticeable shift toward older homes as today's version of the starter home,' agent Libby McKinney-Tristchler, of Team AFA/William Raveis in Southport, CT, tells Realtor.com. 'For many dual-income households, the idea of a smaller, more manageable space is a lifestyle choice, too. They're not interested in spending weekends maintaining big houses or oversized properties.'
Of course, in a pricey area like Southport, with a median house price tag of $869,000, clients are looking for something more affordable.
5 Even smaller new homes can still be pricey—Cotality data shows the median price of a newly built home in April 2025 that's less than 1,500 square feet was $320,000.
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'Buyers are telling me they're looking for something at a price point that feels within reach, and older homes offer that opportunity,' she says.
Andrea Kremer of Rooftop Realty Group represented a small (1,080-square-foot), one-owner, 70-year-old house on Edden Lane in Syracuse, NY. It was on the market only a week before finding a buyer.
'It's a simple supply-and-demand issue here,' she says. 'We have a lot of buyers, and we don't have a lot of inventory. As long as the house is priced correctly in a decent area and is something someone can make their own or is move-in ready to some extent, they are flying off the shelves if they are under $300,000.'
The little red four-bedroom fixer-upper had a bidding war going and was sold at almost $50,000 over the list price of $129,900.
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'It was probably the only home in this area for that price,' Kremer says.
Re/Max agent Bruce Ailion says the trend toward older and smaller is one he is seeing in Atlanta as well.
'A decade ago, these homes would have been challenging to sell,' he tells Realtor.com. But these days, 1950s-built homes that are a mere 750 to 1,100 square feet are being snapped up, either by buyers in their 20s and 30s—or their boomer/Gen X parents.
'Going smaller and older is one of the few ways to get an affordable detached home,' he says.
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And then there's property taxes.
'Most counties base the tax base of a home on the purchase price. A fixer-upper is going to have a lower tax base,' says Jeff Lichtenstein, CEO of Echo Fine Properties in Jupiter, FL.
5 The little red four-bedroom fixer-upper had a bidding war going and was sold at almost $50,000 over the list price of $129,900.
ungvar – stock.adobe.com
Quality over quantity (of square feet)
Jonathan Klemm, CEO of general contracting company Quality Builders, says he saw an opportunity when he closed on a small three-bedroom home built in 1963 for $311,000 ($173 per square foot) in Lyons, a Chicago suburb. The median price in the neighborhood is $193 per square foot.
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With his background, Klemm believed he could put the work in, save money, and put his style stamp on the home. With two young daughters, he thought 1,800 square feet was as small as he could go—and it was all he and his family needed.
'Many people are more willing to put in the work and do minor cosmetic work and/or live with some of the older styles and upgrade over time,' he tells Realtor.com. 'I kind of wanted something I knew we could renovate. From the beginning, I was heavily leaning toward an older home in need of cosmetic touch-ups.'
Many homebuyers opting for smaller, older homes believe that, unlike newer homes, they are built to last.
5 Data shows the median price of a newly built home in April 2025 that's less than 1,500 square feet was $320,000.
fizkes – stock.adobe.com
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'I'll be the first to say it since no one in my industry wants to say it: New homes are crap,' Los Angeles real estate investor Jameson Tyler Drew tells Realtor.com. He also sells in his home state of Indiana.
He says that while new construction is a 'solid chunk' of his sales, those homes tend to be plagued with issues.
'These homes—and I'm not throwing any particular home builder under the bus because it's an industry-wide problem—almost immediately have problems upon completion,' he says.
5 Many homebuyers opting for smaller, older homes believe that, unlike newer homes, they are built to last.
Spiroview Inc. – stock.adobe.com
'Missing joists, cracked window welds, HVAC installed wrong, the list goes on. To make matters worse, the bigger home builders will fight you tooth and nail before they fix anything major they are responsible for.'
'I've seen new houses that somehow manage to have uneven foundations. I've seen every kind of screwup that comes with home builders not coordinating correctly and using the cheapest products they can find.'
He favors historic homes built with durable materials that are hard to find in new construction.
'Floors and joists are often made of American chestnut, a tree that's nearly extinct these days,' he says. 'They made for extremely durable, beautiful floors. Even if you don't opt for the Victorian mansion, the cookie-cutter houses built in the 1930s-1960s still offer thicker walls and better materials than you'd find today. All for a fraction of the cost.'
His advice? Go old.
'I will always advocate for my client to buy an older home over new construction every day of the week,' he says.
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