Buying a first home can feel overwhelming and discouraging for many house hunters in the Washington area.

During the pandemic, home prices have been rising at double-digit rates. Competition in the market has fueled bidding wars and multiple offers. Approximately 40 percent of sales in the Washington metro area were over list price in 2021. First-time buyers are looking for a starter home, but what exactly is a starter home in the Washington area?

It depends a lot on incomes, which, on the plus side, are higher in Washington than in many other parts of the country. A typical young, college-educated couple in the region could have an income of $120,000. Given current mortgage rates, and assuming a 5 percent down payment and average costs of property taxes and insurance, this couple can afford a home priced at approximately $533,000. On the surface, this first-time buyer couple in the Washington region looks to be in a pretty good position to buy a home.

Mortgage rates keep climbing, show no sign of slowing down

Single buyers — including single female buyers who make up the second-largest share of home buyers — will have different options. With an annual income of about $70,000, this first-time buyer could only afford a home priced at $350,000.

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According to analysis of Bright MLS sales data, about half of homes listed for sale in the Washington area in 2022 were at $533,000 or below, affordable to the college-educated couple. But only 20 percent had a price tag of $350,000 or less, meaning single buyers have fewer options.

In either case, a starter home in the Washington region is probably not going to be a single-family dwelling. The average list price of a single-family detached home in the region is about $915,000. Only 27 percent of single-family detached homes that went on the market in 2022 were priced at $533,000 or below. This is a huge change from just five years ago, when more than 40 percent of single-family homes sold in the Washington area would have been affordable to this typical home-buying couple.

However, even in this tight market, first-time buyers in the region do have options. But it’s more important than ever for home buyers to keep an open mind and be flexible. It’s always been true that home buying involves trade-offs about the type of home, location and home features.

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For example, for some Washington-area first-time buyers, a starter home could be a townhouse. About half of all townhouses listed for sale in the first quarter of 2022 are priced below $533,000 and relatively affordable to that young, college-educated couple buying their first home. Only about 15 percent of townhouses on the market have list prices of $350,000 or below, which means options can be limited for buyers with more moderate incomes.

One-bedroom, one-bathroom condo in D.C.'s Glover Park lists for $399,000

Condos are an important starter home option in the Washington region. The average condo list price across the region is about $446,000. About three-quarters of condos for sale in the Washington region have a list price of $533,000 or less, and about half are listed for $350,000 or less. However, an important caveat for home buyers to consider in their budget are condo fees, which can sometimes be hundreds of dollars a month.

Flexibility on location is key to finding a starter home in the Washington region. First-time buyers who thought they didn’t want a city setting may be pleasantly surprised at the many amenities and greenspaces available in close-in redevelopments. The reverse can also be true — home buyers who had ruled out the suburbs are also finding walkable communities with a wide variety of shopping, dining and amenities outside of the urban core.

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Buying a home is the primary way Americans build wealth. First-time buyers in the current marketplace still have opportunities to find their starter home. However, with record-low inventory at all price points, home buyers need to be ready to act quickly, having their financing lined up so they are in the best position to compete in this market.

Cindy Ariosa is chairman of Bright MLS Executive Committee and senior vice president and regional manager of Long & Foster Real Estate.

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