Home Buying

Why the starter home market in Greater Boston is worse than it seems

Young buyers tour a $299,000 condo in Dorchester. The single-family market is even more competitive. Dina Rudick / Boston Globe

By Scott Van Voorhis

March 25, 2016

2 minutes to read

The Boston area didn’t even make the list in a new Trulia report on the places where challenges to first-time buyers are growing.

First-time buyers in the southern and western states have it the hardest right now when it comes to landing starter homes, Trulia notes.

It’s a conclusion, though, that is likely to raise eyebrows among frustrated buyers in the Greater Boston area, who arguably face a far, far worse situation.

Sure, fewer starter homes may be getting built right now than previously in places like Austin or Salt Lake City. But in Boston and its suburbs, there simply aren’t any new, modestly priced starter homes being built to begin with, points out David Begelfer, chief executive of NAIOP Massachusetts, which represents developers across the state. Nor have there been for decades.

In fact, you would probably have to go back to the 1950s to find the last time true starter homes were being built in the Boston suburbs, with those classic subdivisions of capes and modest colonials now endangered species in upscale towns as tear downs proliferate.

“The kind of pricing, starter home pricing, I am not aware of anything that is out there,” Begelfer said.

High land and construction costs, coupled with restrictive suburban zoning, ensure that when new homes are built in the Boston area, they tend to be on the large and expensive end of the market, if not outright McMansions in the wealthiest communities.

In fact, there isn’t a heck of a lot of new single-family homes being built anywhere in the Boston area, luxury or otherwise, with the number of permits for new homes actually on the decline, even as construction of new apartments and condos soars.

So how did Trulia come to the conclusion that first-time buyers in west or south are actually harder off than their beleaguered counterparts in the Boston area?

As with a lot of things, it call comes down to how you look at the statistics.

Trulia pegs Salt Lake City, San Antonio, Austin, San Diego and Nashville as the five hardest hit markets in terms of a shortage of starter homes for sale. All have seen a roughly 80 percent or more drop in the number of starter home listings in the past four years, while the top ten on the list – which doesn’t include Boston, have seen housing starts fall by more than 70 percent.

The Boston area, by contrast, saw a 55 percent drop in the number of homes for sale in the starter category, which given Trulia pegs at $235,000.

“We did look at Boston in the study and found that starter homes fell by more than half (down 55%) in the last four years, so it’s definitely dire as you said,” replied Daisey Kong, a spokeswoman for Trulia, in an email. “It just wasn’t as bad comparatively to the markets that made the top 10 list where inventory fell by 70%.”

But while Austin is bemoaning a 20 percent drop in new construction, more than 11,000 new single-family homes were built in the Texas city and its environs in 2015, or roughly three times more than the Boston area.

“In the south and west, the barriers to permitting the cost of construction, they really lend themselves to being able to meet demand on a starter-home basis,” Begelfer said. “We have everything going against us.”