Getting off to a good start: Starter homes harder to find
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Keith Servant, 31, and fiance Christine Hunt, 25, recently closed on the sale of this new $309,900 Colonial in Rutland - after they did a complete walk-through of the property. Photo Gallery
A question was put to the Home Builders Association of Massachusetts:
Identify the Bay State community closest to Fenway Park where newly constructed single-family starter homes can still be bought for under $400,000.
The answer? Rutland, a town about 50 miles west of Boston.
If the American dream of homeownership is defined as including a new, detached single-family home with three bedrooms and a backyard, Rutland is a good choice for young middle-class couples who want to start a family.
Last week, Keith Servant, 31, and fiance Christine Hunt, 25, closed on the sale of a new $309,900 Colonial in Rutland.
Of his new neighborhood, Servant said with approval, "It has a lot of little kids and newborns."
For many years, Capes, ranches, and split-levels have been the region's starter-home workhorses. But few new versions of these homes are being built in Greater Boston today. With the high cost of land, new homes tend to be bigger and mostly out of reach for first-time buyers, who accounted for 40 percent of US home purchases.
One result of the high prices and low inventory is that some young first-time buyers are moving to more affordable parts of the country.
In a recent survey, more than half of those considering a move out of Massachusetts cited housing costs as a reason, said Michael Goodman, executive director of economic and public policy research at the University of Massachusetts Donahue Institute. Over time, an exodus of young couples could thin the work force and hurt the state's economy, according to the Romney administration, which hopes to increase the housing supply without contributing to suburban sprawl.
Of course, first-time buyers have cheaper options than purchasing a brand new house. They could buy a fixer-upper, a multifamily home, or a condo, which, for many, has become a cheaper alternative to the single-family starter. In February, the median selling price for a condo in the state was $228,000, compared with $304,200 for a detached single-family house, according to the Massachusetts Association of Realtors.
And there is another way a young couple could find an affordable starter home -- they could get lucky. Many communities now hold housing lotteries for folks of modest means.
Nationwide, land costs represent about 25 percent of a home's selling price. In densely populated Massachusetts, land costs have accounted for 33 percent of the selling price, said Mark Leff, a senior vice president at Salem Five Bank. But because of the scarcity of undeveloped land and because many suburbs are requiring homes to be built on larger lots, as a way to control growth, land costs can now top 40 percent, Leff said. Within Route 128, it's hard to find a lot for under $200,000.
"The cost of land has basically eliminated the starter home from the market," Leff said. "You can't build a ranch anymore. To justify the cost of land, you have to build a big house."
In Rutland, Len Gengel of C&S Builders Inc. built the home that teachers Servant and Hunt just bought. Most homes in that subdivision range from $299,900 to $409,900. A decade ago, when a lot cost $40,000, Gengel built many 1,600-square-foot Capes that sold for about $160,000. But with land costs pushing $100,000, he's mostly building 2,200-square-foot Colonials today. He hasn't built a Cape since 1999.
"If someone asked, I'd build another," he said. "But it would have to be a big one."
Adding to the crunch is the fact that many older homes that began life as starters have been so extensively remodeled that they no longer sell at starter-home prices.
William Apgar, a senior scholar at the Joint Center for Housing Studies of Harvard University, pointed to the Oak Hill Park section of Newton, where returning veterans bought new ranch houses after World War II. Many have been substantially upgraded, and last year, the average sales price of a home in that neighborhood was $477,000, said Elizabeth Dromey, head of the Assessment Administration in Newton. When those ranches went on the market in the late 1940s, the basic price was just under $8,000, said curator Susan Abele of the Newton History Museum at the Jackson Homestead.
"Cedar shingles were $312 extra," she said. "And if you were lucky, you'd get a built-in ironing board."
Today, first-time buyers want more than built-in ironing boards. They want amenities such as central air conditioning and updated appliances and fixtures, said Carolyn Chodat, owner of Classic Properties Realtors in Medway.
Perhaps because they grew up with video games and computers, today's first-time buyers are less handy than those of a decade ago, Chodat said.
And because many couples hold down two full-time jobs, today's first-time buyers have less time for remodeling. Aside from the lower prices, one reason they prefer condos is because condos tend to be newer than entry-level single-families.
"If you say, 'It's a cute little house but it needs a lot of work,' they get nervous," she said.
When Servant and Hunt began house-hunting last summer, they looked at many older homes but didn't like what they saw. In the end, they felt a new home was a better value, and they paid an additional $10,000 for extra cable TV hookups, a bigger basement window, and a coveted cul-de-sac location. The house was also modified so a farmer's porch can be added someday.
Said Servant, "I want to move in and start living right away and not have to paint or work on the shutters or the roof."
Keith Servant, 31, and fiance Christine Hunt, 25, recently closed on the sale of this new $309,900 Colonial in Rutland - after they did a complete walk-through of the property.
