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First-Time Homebuyers Face Challenges as Starter Homes Disappear in 2025

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ORLANDO, Fla. - Rezul -- As the 2025 homebuying season begins, first-time buyers in Central Florida are finding it increasingly difficult to secure an affordable starter home. Once a stepping stone into real estate, the classic starter home—typically under 1,400 square feet—has become a rarity in today's market.

The Decline of the Starter Home

According to the U.S. Census Bureau, only 9% of new homes built in 2023 were under 1,400 square feet, a dramatic decrease from 1982 when nearly 40% of new homes fit this category.

The Factors Behind the Shortage

Restrictive zoning laws are a major contributor, limiting where and what types of homes can be built. Rising costs of labor, materials, and land further hinder builders from constructing affordable homes. Sam Khater, chief economist at Freddie Mac, explains that many builders are unable to build smaller homes profitably due to high costs and regulations. Instead, they focus on high-end single-family homes or luxury multi-family properties.

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Homebuilders also contend with soaring expenses. Over the past decade, labor and material costs have risen by 50%, while land prices have increased by two and a half times that amount, according to CoreLogic's chief economist, Selma Hepp. These rising costs make it difficult to produce lower-priced homes.

Market Challenges for First-Time Buyers

Since January 2020, home prices have surged over 52%, according to the S&P CoreLogic Case-Shiller U.S. National Home Price Index. With mortgage rates hovering near 7%, affordability remains a concern. Many homeowners are staying put, locked into low mortgage rates, keeping the supply of existing homes tight and driving prices even higher.

The National Association of Realtors (NAR) reports an all-time low in first-time homebuyer participation, while all-cash purchases hit record highs. In 2024, the median age of a first-time homebuyer rose to 38—compared to just 29 in 1981—highlighting the mounting difficulties for new buyers.

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Opportunities for First-Time Buyers

Despite these challenges, options remain for first-time buyers in Central Florida. Potential strategies include:
  • Exploring New Construction Incentives: Some builders offer financing incentives and closing cost assistance.
  • Working with a Real Estate Professional: An experienced agent can help identify off-market deals and negotiate favorable terms.
  • Utilizing First-Time Buyer Programs: Florida offers down payment assistance programs and favorable loan options like FHA and USDA loans.

"While the market presents unique challenges, there are still viable paths to homeownership," said Phil Holliday, Realtor with Preferred Real Estate Brokers. "With the right strategy and guidance, first-time buyers can navigate this competitive landscape successfully."

For more information, or to schedule an interview, contact:

Phil Holliday
Preferred Real Estate Brokers
📱 702-525-7655
📧 Doc@PhilHolliday-Realtor.com
🌐 PhilHolliday-Realtor.com
🌐 Philip.ViewHousesinFlorida.com

Source: Phil Holliday Realtor-Preferred Real Estate Broker
Filed Under: Real Estate
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