Starter homes are making a comeback — here’s where to look

Something rare is springing up in the grass fields along Detroit’s Kercheval Avenue: new starter homes, by the dozens.

The new-home community is an unusual sight, but one that matches the older homes that remain in the area, survivors of the city’s economic challenges. Greatwater Opportunity Capital, which is developing the homes through an affiliate, entered the market as an apartment buyer 11 years ago.

Moved by the market, it expanded its focus.

“The middle class was born here, and with that came the ability to buy a home,” Matt Temkin, one of Greatwater’s co-founders, tells Realtor.com. “The real health and promise of the city was in homeownership.”

Starter homes—smaller properties typically intended for couples or young families- are a vanishing product type. With increasing home values and interest rates, the price of such a home is rising to seven figures in some states. And that’s before hidden costs.

This is forcing young people to buy an older home as their first property, which carries its own risks. Part of the rising homeownership costs are large, unexpected expenses, and those can be even larger in an older home.

But the trends might be shifting. A Realtor.com analysis of nationwide building permit data showed that the size of a median new build shrank from 2,128 square feet in 2022 to 1,965 square feet in 2024.

Starter homes are filling a gap in the market

Temkin doesn’t like the term starter home because it invokes the idea of “stamped-out cheapos.”

But he acknowledges there is a gap in the market for this type of home. The buyers tend to be younger people in their late 20s and 30s. Most, but not all of them, are couples. Kids might be in the future. They might have a dog, but they don’t want a huge backyard.

A house like this is very reasonable. The Detroit homes start at about $330,000 at 1,800 to 1,850 square feet. The top product, with an added basement, might be closer to $550,000 at 2,400 square feet.

Greatwater Homes acquired 400 lots on the city’s east side and has sold 32. Temkin wants to sell an additional 36 this year. But the appeal is still in the simplicity. With a trade-off of a shorter list of options, the homes are still well-constructed, featuring solid oak floors, casement windows, and hardy wood siding.

“People come from out of town and say we won’t get anywhere with low density,” Temkin said. “But what if you told your employees that if they made a $100,000 combined income, they could buy a brand-new home?”

Are starter homes the answer to the national housing shortage?

The lack of starter homes stands out, but at a time when the nation faces a shortage of millions of housing units, it is a particular side of the problem. These homes are a way into the real estate market—as families grow, they sometimes keep them to rent.

They’re a jumping-off point of household wealth, Realtor.com senior economist Joel Berner says.

“The free market is absolutely capable of meeting demand for starter homes if price signals indicate that it exists,” Berner says. “Supply-side solutions, meaning building homes of all types and prices, are the only long-term solution to the housing shortage in the country.”

This comes as Congress seems to have momentum on a set of proposals to reform housing policy and make it easier to build nationwide.

The House is aiming to revive the Housing for the 21st Century Act, a comprehensive housing bill aimed at jump-starting the housing market. Like the Senate’s version, the Road to Housing Act, it contains many provisions that would benefit starter-home construction.

Those provisions include incentives for localities to streamline design reviews, reducing some duplicative requirements, and cutting chassis requirements for manufactured homes, Francis Torres, director of housing for the Bipartisan Policy Center, tells Realtor.com.

“Starter housing is an underappreciated aspect of both bills,” Torres says. “They address different buckets that are often seen as a potential way to generate more housing supply.”