The starter home is inextricably linked to the myth of the American dream of home ownership, the fulfillment of the middle class striver’s chance to build equity and pass on generational wealth. And like all myths, there is some truth to the starter home rung on the housing ladder, but also a fair amount of misinformation (cue your real estate agents at closing telling you to call them when you are ready to “move up” the home ladder).

Here we’ll pause to point out that starter homes are not only a great entry point for young people, but also for investors. Rents tend to be lower and there is strong demand for affordable rentals. 

For now, consider Levittown, on Long Island. It was christened the “original starter community” by The New York Times in a 2018 article, long before every article about housing referred to the “affordability crisis.” Levitt & Sons built some 17,000 homes from 1947 to 1951 on 4,000 acres of potato fields, appealing to returning World War II servicemen. Most of these homes were around 750 square feet, with two bedrooms, a living room, kitchen and bathroom, built on 60-by-100 foot lots. An unfinished attic allowed for future expansion. (For comparison, the average square footage for a new single-family home in the US in 2025 was 2,364 square feet, according to the National Association of Home Builders.)

Here’s the thing about Levittown. Many people who bought their “starter homes” there never left. Decades later, these homes have been expanded, customized, and renovated in ways that make the original tracts unrecognizable.

Jean Holland was 67, and working as a paralegal when she told The Times back in 2018: “Even if I won the lottery, I wouldn’t leave here,” she said. “I may build my dream house, but I wouldn’t leave Levittown.” 

At that time, she was on her fifth Levitt house, a ranch that extended beyond its original footprint and now had five bedrooms and an in-ground swimming pool that she and her husband paid $432,000 for in 2016. Her son Brandon, then in his 20s, lived on the second floor.

Jim Macaluso, who took over his father’s construction business in northern New Jersey 30 years ago, said that “we used to think of starter homes that were small and less expensive. Now the houses that are less expensive — you can’t move into them” because they need so much work. 

“Or they are so far away that the commute doesn’t make sense,” he told proptext.

The economics of building a starter home no longer make sense in the higher-priced suburbs where he mostly works.

“The cost of construction is so high,” Macaluso said. “It’s all about regulations, zoning, storm water management — it all costs something.”

Land costs necessitate that a builder put up a larger, more expensive home. 

“The land value in New Jersey is so high. If you buy a piece of land for $750,000, you can’t put a two-bedroom house on it,” Macaluso said. “I can buy two lots in Pennsylvania for $30,000 each and then I can build a house for $200 a square foot on one of them and sell it for $500,000 and make some money.”

In the higher-priced suburbs, one avenue for less expensive housing is greater density, but that often runs into opposition.

“You could do cluster housing or townhouses,” Macaluso added, “but a lot of these towns don’t allow for cluster housing or townhomes.”

So the end result is that a lot of younger people live at home to save money for a larger down payment, and by the time they buy they are looking for a home they might stay in for a while, or the rest of their lives.

The typical age of first-time buyers hit an all-time high of 40 years old last year, according to the National Association of Realtors, while the share of first-time home buyers dropped to a record low of 21%.

"The housing market is a tale of two cities," said Jessica Lautz, NAR deputy chief economist and vice president of research. "We're seeing buyers with significant housing equity making larger down payments and all-cash offers, while first-time buyers continue to struggle to enter the market."

Delaying a home purchase from 30 to 40 translates into losing about $150,000 in equity on a typical starter home, according to some estimates. 

If there is such a thing as a “typical starter home.”

In the last 50 years, builders have been going bigger. Homes with four or more bedrooms made up nearly half of all new construction in 2022, according to the Census Bureau, compared with 1 in 5 in the 1970s. New homes almost always have at least two full bathrooms, compared with roughly 60 percent in the 1970s. And gone are the days of no garage, or a single bay garage

While Americans have been moving into larger homes, family sizes have been shrinking. The average number of people living under one roof has fallen from about 3.6 in 1970 to just over 3.1 in 2025. (Don’t ask us what 0.1 person looks like.) In other words, households are about 13 percent smaller, while homes have grown by about 43 percent.

The average newly built American has more than 940 square feet per person, up from about 550 square feet in 1973. But have these bigger homes made us happier?

Living space may not be the determining factor for a happy life, says Mariano Rojas, an economist at the National Technological Institute of Mexico. 

“What matters is not really the size of the house but what happens inside that house with relationships,” Rojas told The Washington Post. “If you move to a larger house, and you sacrifice that, then you have a problem.”

Social scientists call it the “inverted U” hypothesis: The relationship between happiness and the number of people in a household looks like a parabola on a chart.

Living alone or with one other person can lead to loneliness, but a crowded living space can create stress, anxiety and depression. A study that focused on Hong Kong, where apartments tend to be small and crowded, suggested that about 140 square feet per person was the minimum. Happy households fall somewhere in the middle. 

Gerardo Leyva, an economist and researcher at Iberoamerican University in Mexico City, studied tens of thousands of households in Mexico and Europe and found that those living alone were the most satisfied with their financial lives. But the happiest households had about four to six people in them, no matter the size of the house.

Busy houses build emotional bonds among family members, Leyva believes, and provide  a support system for confronting life’s vicissitudes. People in Latin America are happier than measurements of wealth would predict, most likely because of the closeness of the members of a larger household, even if the home is smaller.

As the McMansion craze has spread across the US, the mood in the US has seemed to darken. When the World Happiness report was instituted back in 2012, the US ranked 11th. This past year, it ranked 25th.

So if you think a starter home is in your future, they are still out there for the taking. Redfin even published a guide to buying a starter home back in October, and added this piece of advice.

“Starter homes aren’t what they used to be,” says Redfin Senior Economist Elijah de la Campa.  “Today, a small fixer-upper condo is often all a first-time homebuyer can afford. The American Dream is changing; for many, it no longer involves a house and a white picket fence.”

Affordability is driving political conversations around the country and will be a central issue in the upcoming midterm elections. Some are choosing to vote with their feet, as they say, and are moving to the Midwest, which has the lowest median home sales price in the country. That price, $319,400 in November, versus $409,200 nationwide, according to the National Association of Realtors, is an attainable number for many middle class Americans. Rents in major Midwestern cities are also lower than the national median, according to data from Bank of America, which defines the Midwest as Indiana, Iowa, Illinois, Kansas, Michigan, Minnesota, Ohio, Missouri, Wisconsin, Nebraska, North Dakota and South Dakota. Wages are an important factor in affordability, and year-over-year wage growth has been climbing more steadily in the Midwest over the past year than it has in other regions, Bank of America reported.

The largest landowner in the US bought another 937,000 acres of ranchland in New Mexico in late 2025, bringing his total to  2.7 million acres. (Delaware has 1.2 million acres total.) Stan Kroenke, whose portfolio of professional sports teams is worth $21.2 billion and includes the NFL’s Los Angeles Rams, the NHL’s Colorado Avalanche, the NBA’s Denver Nuggets and the Premier League’s Arsenal, also owns roughly 60 million square feet of commercial space, including huge sports venues in Inglewood, Calif., and Denver. Called “Silent Stan” for his reluctance to give interviews, Kroenke made his first fortune with large shopping centers, then married the Walmart heiress Ann Walton Kroenke in 1974 (Walmart stores anchored many of his shopping malls). The 2008 financial crisis prompted investors to seek out alternative investments, and America’s ultrawealthy turned to farmland to diversify their portfolios.

Construction of AI data centers is increasing demand for skilled tradespeople, and according to the International Brotherhood of Electrical Workers, the union representing electrical workers, some locals “are facing single data center projects that require two, three, sometimes four times their current membership.” The Bureau of Labor Statistics estimates that between 2024 and 2034, there will be a shortage of roughly 81,000 electricians annually. One McKinsey study estimated that between 2023-2030 an additional 130,000 electricians, 240,000 construction laborers and 150,000 construction supervisors would be needed in the US. Tech companies building data centers are competing with residential housing, hospitals, factories, and energy facilities. There’s already not enough workers to go around. “We have had a skilled construction worker shortage in America for years,” says Anirban Basu, chief economist of the Associated Builders and Contractors, a trade group for the construction industry.

In just 8 weeks, learn institutional-grade real estate analysis and modeling from Wharton faculty and seasoned investors.

You’ll gain:

Join a thriving community of 5,000+ graduates for ongoing career development, networking, and deal flow.

Use code SAVE300 at checkout to save $300 on tuition.

Program starts February 9.

Get the Brochure

You can earn free prop.text merch for referring investors to the newsletter

25 referrals - hat 🧢
50 referrals - tee shirt 👕
100 referrals - weekender bag 🎒

Copy & paste this link: {{rp_refer_url}}