Finding starter homes in the U.S. is a challenging task.

When the 2025 buying season starts this spring, first-time homebuyers may face challenges in finding suitable starter homes.

According to experts, the homes that served as a starting point for Americans in real estate are gradually vanishing.

In 2023, only 9% of new homes built in the United States were under 1,400 square feet, compared to 40% in 1982.

Local zoning laws that restrict construction are causing affordability issues for home buyers, according to experts. These laws, which determine what can be built in specific areas, have led to an increase in the cost of building homes of all sizes.

"According to Sam Khater, chief economist at Freddie Mac, many builders are not leaving money on the table. Instead, they are unable to build or it has become too expensive to build, so they can only focus on high-end single-family and high-end multifamily projects."

The S&P CoreLogic Case-Shiller U.S. National Home Price Index indicates that home prices nationwide have risen more than 52% from January 2020 to October 2024.

Government red tape, rising construction costs, and limited availability of land are challenges faced by homebuilders.

According to Selma Hepp, chief economist at CoreLogic, while labor and materials have increased by approximately 50% over the past ten years, the cost of land has risen two and a half times as much.

The global financial crisis in 2007-2008 accelerated the demise of the starter home, as the homebuilder industry consolidated. Despite this, the annual rates for new home construction remain lower than those seen in the early 2000s and prior years.

The low supply of existing homes for sale and rising prices in most parts of the country pose a significant challenge for the approximately 3 million potential first-time buyers in the U.S., as many homeowners are locked into their current homes with low mortgage rates.

According to Jessica Lautz, deputy chief economist at the National Association of Realtors, the market is unique because there is a record low of first-time home buyers, but a record high of all-cash buyers.

The median age of first-time home buyers in 2024 reached an unprecedented high of 38 years old, compared to the 1981 average of 29 years old, as reported by NAR.

The video above explains why starter homes are becoming increasingly difficult to find in the U.S.