Real Estate News

Affordable Entry-Level Homes Remain Scarce Across U.S. Cities

The shortage of affordable entry-level homes continues across U.S. cities, creating challenges for first-time buyers. Limited inventory and rising prices make homeownership increasingly difficult nationwide

flareAI Services

22 Dec 2025 — 5 min read

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Picture a young couple in Holland, Michigan, standing on a quiet street, staring at a faded "For Sale" sign on a modest bungalow. They've scoured listings for months, but affordable homes vanish before they can act. In Tampa, Florida, a single parent scrolls through a real estate app, hoping for a condo that won't break the bank, only to find prices soaring beyond reach. Across Michigan and Florida, the dream of an entry-level home once a cornerstone of American life is slipping away, leaving first-time buyers caught in a market that feels increasingly out of touch.

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The Vanishing Starter Home

The starter home, that humble first step into homeownership, is becoming a relic in many U.S. markets. In West Michigan, data from the West Michigan Realtors Association paints a grim picture: homes priced under $250,000 have dwindled by nearly 30% since 2020. In Holland, median home prices have climbed 15% over the same period, far outstripping local wage growth. Florida faces an even steeper challenge. Research from the University of Florida shows median home prices in cities like Tampa and Orlando rising 20% faster than entry-level wages, effectively locking out many aspiring homeowners.

Why the shortage? Developers in both states are chasing higher profits, prioritizing mid- to high-tier homes over modest builds. In Holland, new construction often starts at $400,000, leaving first-time buyers with few options. In Florida, coastal insurance costs and restrictive zoning laws further choke the supply of affordable homes, pushing buyers toward condos or townhomes with hefty fees. Proptech platforms, equipped with AI-driven search tools, try to help by spotlighting scarce listings, but they can't conjure homes that don't exist.

Commission Changes Fall Short

The NAR settlement of 2024 promised to reshape real estate by altering how commissions are negotiated, offering buyers and sellers more control. Yet, as a Yahoo Finance report notes, these changes haven't meaningfully reduced costs. A typical 5-6% commission on a $300,000 home still translates to $15,000-$18,000 a significant hurdle for budget-conscious buyers. In Michigan and Florida, where affordability is already strained, the new rules have failed to deliver the relief many hoped for.

Buyers now face the task of negotiating commissions directly, a process that can be daunting. According to Realtor.com, some agents are shifting to flat-fee or partial-service models, charging as little as $3,000 for a transaction. But confusion lingers. “Many buyers don't know they can haggle over commissions,” a Tampa agent explains. “And even when they do, the savings rarely bridge the affordability gap.” For sellers, lower commissions can mean fewer showings, as agents prioritize higher-paying listings, especially in competitive markets like Orlando.

Ground-Level Realities

In Holland, Michigan, the affordability crisis is palpable. Local reports show developers shunning starter homes in favor of pricier builds, with a 1,200-square-foot home that sold for $180,000 in 2020 now listing at $240,000 often needing costly updates. In Florida's urban centers, the situation is no better. Tampa and Orlando buyers are increasingly steered toward condos or townhomes, where HOA fees and rising insurance costs can rival mortgage payments. “I looked at a Tampa condo,” one buyer said. “The fees were nearly as much as my rent.”

Proptech platforms offer some relief, with tools like commission calculators and affordability filters helping buyers navigate tight markets. But their impact is limited. “These apps are great for finding what's out there,” a Michigan State University housing expert says, “but they can't fix the core issue: there aren't enough homes under $300,000.”

Structural Barriers and Risks

The shortage of entry-level homes stems from deep-rooted issues. In Michigan, zoning laws in towns like Holland restrict high-density projects that could yield more affordable units. In Florida, hurricane-driven insurance costs add thousands to annual homeownership expenses, making even modest homes unaffordable. These factors widen the affordability gap, deepening socioeconomic divides as young and lower-income households are priced out of the market.

The post-NAR settlement landscape introduces additional risks. Misconceptions about “commission-free” services can mislead buyers, while inexperienced negotiators may struggle to secure favorable terms. Sellers offering lower commissions risk reduced agent interest, particularly in Florida's high-end markets, where pricier listings dominate. As List with Clever advises, buyers and sellers should approach negotiations with clear strategies, such as requesting itemized service breakdowns to ensure value for their money.

Emerging Solutions and Innovations

Amid the challenges, opportunities are emerging. Proptech platforms are evolving, offering AI-powered tools and guided workflows to help buyers pinpoint affordable listings. In Michigan, some agents are adopting flat-fee models, slashing costs for budget-conscious clients. Florida's affordable housing grants and Michigan's housing trust funds are fueling experiments with modular and prefab construction, which could reduce building costs by up to 20%, according to a University of Florida real estate expert. “Modular homes are quicker to build and far cheaper,” the expert notes. “They could be a game-changer if scaled up.”

Policy changes are also on the horizon. Michigan and Florida lawmakers are exploring incentives to encourage developers to prioritize starter homes, though progress is slow. Without coordinated action, these solutions risk falling short, leaving affordability challenges entrenched.

Looking Ahead: A Call for Action

Experts from Michigan State University and the University of Florida warn that starter home scarcity will likely persist, with rising rents adding pressure to already stretched budgets. The convergence of proptech, innovative construction, and policy reform offers hope, but only if stakeholders act decisively. Agents must embrace new commission models, buyers need better tools to navigate negotiations, and developers should be incentivized to build for affordability, not just profit.

The couple in Holland and the parent in Tampa keep searching, their hopes tempered but unbroken. The starter home, once a symbol of opportunity, demands a revival. It's time for agents, policymakers, and innovators to collaborate on solutions that bring the American dream back within reach.

Frequently Asked Questions

Why are starter homes becoming harder to find in Michigan and Florida?

Starter homes are disappearing because developers prioritize building mid- to high-tier properties that generate higher profits. In West Michigan, homes under $250,000 have declined by nearly 30% since 2020, while Florida faces additional challenges from restrictive zoning laws and soaring coastal insurance costs. These factors combine to create a severe shortage of entry-level housing options for first-time buyers.

Did the 2024 NAR settlement make buying a home more affordable?

Despite promises of increased control over commission negotiations, the NAR settlement hasn't significantly reduced homebuying costs. A typical 5-6% commission on a $300,000 home still amounts to $15,000-$18,000, which remains a substantial burden for budget-conscious buyers. While some agents now offer flat-fee models starting around $3,000, many buyers remain unaware they can negotiate, and the savings rarely bridge the overall affordability gap.

What solutions are emerging to address the affordable housing shortage?

Innovative approaches include modular and prefab construction, which can reduce building costs by up to 20%, along with AI-powered proptech platforms that help buyers identify scarce affordable listings. Michigan and Florida are also exploring affordable housing grants, housing trust funds, and policy incentives to encourage developers to build starter homes. However, experts warn these solutions require coordinated action and scaling to make a meaningful impact on the persistent shortage.

Disclaimer: The above helpful resources content contains personal opinions and experiences. The information provided is for general knowledge and does not constitute professional advice.

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