What is a starter home? Not a building type but a price tier: the smallest, oldest or furthest-out home a first-time buyer can actually finance, bought expecting to move up rather than to stay.
Starter home is a market phrase rather than a defined category. No appraiser, lender or county record uses it, and nothing about a home makes it one except its price against everything else for sale. In practice it means the bottom of a metro's price range: the smallest, oldest or furthest-out home a first-time buyer can actually finance, bought with the expectation of moving on within several years rather than staying. Condominiums and townhouses fill the role as often as detached houses do.
The arithmetic is the whole appeal. A $285,000 home with 3.5 percent down needs $9,975 at the table, against $17,500 for a $500,000 home at the same percentage, and the monthly payment moves with the price the same way. What the arithmetic leaves out is the cost of the second move. Selling and buying again commonly runs 8 to 10 percent of a price once commission, title, escrow and the new loan's costs are counted, which is several years of appreciation at ordinary rates. A starter home held two years is expensive. Held six or seven, it is not.
So the questions worth asking are about the hold rather than the entry. What are the association dues and what do they cover, since a low price with heavy dues is not a low payment. How old are the roof, the air conditioning and the water heater, because in the valley the air conditioning is the one that fails first and replacing it is not cheap. And is the home entry-level in price or in condition, since a home that needs work is a fixer-upper priced like a starter home, and the repairs belong to the buyer.
A worked example
A 1,150 square foot three-bedroom built in 1988 at $285,000. FHA financing at 3.5 percent down is $9,975 at the table, and the association takes $45 a month. Selling and buying again commonly costs 8 to 10 percent of the price, so about $25,000 has to be earned back in appreciation before the move up is free.
Homes under $300,000 in Las Vegas
Questions people ask
How much is a starter home in Las Vegas?
There is no fixed figure, because a starter home is whatever sits at the bottom of the local price range at the time. The honest way to read it is to look at what is actually listed under $300,000 in the valley and see what the money buys in size, age and location.
Is it better to buy a starter home or wait for the home you want?
It turns on how long the first home is held. Buying and selling again commonly costs 8 to 10 percent of the price, which takes several years of ordinary appreciation to recover, so a two-year hold is expensive and a six or seven year hold usually is not. The other side is that waiting means paying rent in the meantime.