The Morning: Stuck in a starter home

Plus, Israel, the South African election and the online afterlife of Franz Kafka.

View in browser|nytimes.com June 2, 2024 Good morning. Today, my colleague Rukmini Callimachi has a story on troubling economic trends for people trying to buy, or sell, starter homes. We're also covering Israel, the South African election and the online afterlife of Franz Kafka. —David Leonhardt In Chicago.  Michelle Litvin for The New York Times Stuck at the start By Rukmini Callimachi I cover real estate, with a focus on the affordability crisis. Buying your first home has long been a milestone of adulthood. So has selling your first home and moving into something bigger. But in the last few years, many Americans have gotten stuck in their starter house. That's because the U.S. housing economy is being hammered by three forces: the highest interest rates in around two decades, record home prices and near rock-bottom inventory. "Home affordability is the worst I've ever seen it," Daryl Fairweather, Redfin's chief economist, told me. Many of those who bought their homes in recent years are unable to trade up, hampering the ability of the group behind them to purchase its own starter homes. In today's newsletter, we'll look at how the housing market trapped both groups. Twice as expensive In the past, the starter home served as a bridge: Families just starting out would squeeze into a smaller home and build equity. With time, as their careers grew and their incomes increased, they cashed in the equity and moved to something bigger. But now that process has hit a wall. "The trade-up buyer has just disappeared," Sam Khater, chief economist of Freddie Mac, said. A majority of homeowners — six out of 10 — have mortgages with interest rates that are locked at 4 percent or lower. With rates now hovering around 7 percent, most people who buy a home today will pay much more interest on their new mortgage. Economists put it to me like this: If you were to sell your house today and buy an identical one across the street, your payment would double — and that's before you factor in how much the house across the street has gone up in value. (Which is a lot: According to Redfin, home prices are at a record high.) In Chicago, Chris and Alison Wentland told me about the predicament in which they found themselves. Last year, they decided to sell their townhouse in the Lincoln Park neighborhood. Their children, at 2 and 6, were sharing a room not much bigger than a walk-in closet, with their daughter's bed pressing up against their toddler's crib. They began looking for a four-bedroom. They had purchased their townhouse in the low $500,000s, and would likely be able to sell it for $700,000. But getting that one extra bedroom in the popular Lincoln Park neighborhood would put their next home in the $1 million range. Despite having a sizable equity from their starter home, the higher rates and higher cost meant that their monthly payments would go from around $3,000 to at least $7,500, their real estate agent warned. Now, the professional photographs that their broker had taken of the townhouse — including a snazzy 3-D video — are languishing on a hard drive, out of the public's view. Their home is one of 50 properties that the brokerage has photographed but has not been able to list. Nothing to buy It has also become harder to buy your first home. Starter homes — defined as those that cost 75 percent or less of the median home price in a given market — have gone up faster in value than any other category of home. The problem is being exacerbated not just by rising prices and high interest rates, which affect every tier of the housing market, but also by something more fundamental: The number of new entry-level homes being built has fallen off a cliff. In the 1970s, more than 400,000 entry-level homes were built every year. By 2020, only 65,000 were built. One reason for the drop is the rising cost of materials; smaller homes just don't pencil out for builders. So the supply of starter homes is not being replenished — by builders or by the last generation moving out and selling. The first rung of the ladder of homeownership, long a key part of the American dream, has become especially hard to climb. As just one example: I spoke to a pair of sisters in Oakland who decided to pool their resources to buy a duplex, each sibling taking one unit. Before the pandemic, they were approved for $850,000. But even in that price range, they couldn't find anything in a city with famously high property values; one house had a rat infestation, another had fungus, the sisters told me. Their banker recently told them that they were now qualified for only a $750,000 loan — $100,000 had evaporated because of rising interest rates. If they couldn't find anything at the higher amount, they wonder, how will they find anything at this lower price point? ADVERTISEMENT THE LATEST NEWS Israel-Hamas War Benjamin Netanyahu Ronen Zvulun/Reuters A day after President Biden called for a truce in Gaza, Benjamin Netanyahu reiterated that Israel would not agree to a permanent cease-fire as long as Hamas retained power there. Two far-right members of the Israeli government — Bezalel Smotrich and Itamar Ben-Gvir — threatened to quit the coalition should Netanyahu accept a cease-fire plan laid out by Biden. Thousands of protesters rallied in Tel Aviv and other cities in Israel, calling on Netanyahu to accept the cease-fire proposal. Officials from Israel, Egypt and the U.S. are expected to meet in Cairo today to discuss reopening the Rafah crossing, an important route for aid into Gaza. 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So I was interested in this notion lately that, oh, you can change, the personality isn't fixed. That seems current: this notion of self and identity, gender. I sort of like that it's all on the table, that everybody's thinking you kind of are who you say you are. One idea of the film, ["Hit Man"], is that we all have the power to create our own identity. The film then suggests that this includes the identity of someone capable of murder and living happily after having committed murder. That's pretty dark! Yes, but I don't mind. I mean, everybody wants someone dead, probably. I've been in the film business over 30 years. Of course I could murder somebody. Whom do you want dead? No, I don't want anyone dead. I'll spread that out: I don't want anything dead. But I think there's a surprising number of people in the world who, to whatever degree voluntary or involuntary, have done something that has ended a life and can compartmentalize it away. A lot of killers among us. Read more of the interview here. THE NEW YORK TIMES MAGAZINE Illustration by Gaia Alari Click the cover image above to read this week's magazine. BOOKS Keila Shaheen Eli Durst for The New York Times Online: TikTok has changed the way books are sold and marketed. Keila Shaheen's "The Shadow Work Journal" shows how. There's a spell for that: "Cunning Folk" explores a time when the use of "service magic" was an everyday practice. Summer reads: Lounge in the sun with this year's crop of historical novels, including "The Tower," about Mary, Queen of Scots. Our editors' picks: "Finish What We Started," about the MAGA grass roots, and five other books. Times best sellers: Stephen King's latest short story collection, "You Like It Darker," is a No. 1 debut on the hardcover fiction list. THE MORNING RECOMMENDS … Watch these movies before they leave Netflix. Try this restaurant trick when making steak. Escape with a romance novel. THE WEEK AHEAD What to Watch For India's general election results are set to be announced on Tuesday. The Tribeca Film Festival begins on Wednesday. European Parliament elections begin on Thursday. London Fashion Week begins on Friday. A deadline for Netanyahu to come up with a postwar plan for Gaza, set by Benny Gantz, a centrist member of Israel's war cabinet, is Saturday. Meal Plan David Malosh for The New York Times. Food Stylist: Simon Andrews. This week, Cooking unveiled the Summer 100 — recipes that the team thinks you should have on repeat for the next three months. In the Five Weeknight Dishes newsletter, Emily Weinstein includes one of the meals featured on the list: summer shrimp scampi with tomatoes and corn. Emily also suggests making pepper-crusted flank steak and spanakorizo with jammy eggs. NOW TIME TO PLAY Here is today's Spelling Bee. Yesterday's pangrams were engulfed and unfledged. Can you put eight historical events — including the discoveries of Galileo, the creation of "Back to the Future," and the debut of Julia Child — in chronological order? Take this week's Flashback quiz. And here are today's Mini Crossword, Wordle, Sudoku, Connections and Strands. Thanks for spending part of your weekend with The Times. Sign up here to get this newsletter in your inbox. Reach our team at themorning@nytimes.com. Editor: David Leonhardt Deputy Editor: Adam B. Kushner News Editor: Tom Wright-Piersanti Associate Editor: Lauren Jackson News Staff: Desiree Ibekwe, Sean Kawasaki-Culligan, Brent Lewis, German Lopez, Ian Prasad Philbrick, Ashley Wu News Assistant: Lyna Bentahar Saturday Writer: Melissa Kirsch Need help? Review our newsletter help page or contact us for assistance. You received this email because you signed up for the Morning newsletter from The New York Times, or as part of your New York Times account. To stop receiving The Morning, unsubscribe. 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