Kelsey Lawry knew finding a starter home in Maine’s competitive real estate market would be tough, but she didn’t think it would be nearly impossible.

Lawry, 28, and her fiance, Zach Martins, 29, have been looking for a house for the better part of a year.

Their list of must-haves is not long: at least two bedrooms, a bathtub, a dry basement and a one-quarter acre of land.

“I think I set my expectations low, and I needed to set them even lower,” she said.

She knew anything in their budget — $300,000 to $350,000 — likely wouldn’t be their dream house.

“But I didn’t realize that $300,000 was going to get a house that had a sunken-in roof and a mold issue with a wet basement that has a lawn that floods every rainstorm,” she said.

They’re not opposed to putting in a little sweat equity – Martins is relatively handy and Lawry said she’s a fast learner. But there’s a difference between a house that needs a little elbow grease and a house that’s not in livable condition.

“I’m definitely feeling discouraged,” Lawry said.

The couple, who live in South Portland, expanded their search to the rural outskirts of the Midcoast. It hasn’t helped.

Balancing full-time jobs with looking at houses almost two hours away has been exhausting, and houses go under contract before they can even schedule a showing.

Everything else in their life feels like it’s taken a backseat. Their weekends are spent either in the car or at one of the several open houses or showings they have to book to make the trip worth it. The couple got engaged in August, but wedding planning has been shelved until they can find a house – affording both isn’t an option right now.

“We want this more than anything,” Lawry said. “This is going to provide us the first step into actually starting a life together. And while, yes, we’re able to do things still together and grow as a couple, it does put a lot of things on hold.”

A STALLED CYCLE

The small, affordable house highly sought after by young, first-time homebuyers is becoming increasingly difficult to find in Maine.

They’re the houses that for previous generations were ubiquitous and synonymous with the American Dream.

They’re often no-frills ranches, mini-capes or bungalows, somewhere around or below 1,400 square feet with two to three bedrooms and one, maybe one-and-a-half bathrooms.

Once upon a time, that kind of house in Maine was below $200,000. It was the first step in a natural progression. A young couple buys a starter home, has one or two kids, builds equity and after a few years, as the family grows in size and wealth, moves into a bigger house with more bells and whistles like a big yard and a garage. Then, when the kids grow up and leave home, the couple might choose to downsize to a condo or another “starter” home, opening up their previous larger home for another family to upgrade from its starter home and leaving a vacancy for yet another family.

In the 1940s, about 70% of the new single-family houses built were below 1,400 square feet. In 2022, despite family sizes getting smaller, only about 8% of new homes fit the bill. State-specific information is not available because Maine does not track that data.

Housing starts, or new construction, dropped dramatically following the Great Recession in 2008 and never picked back up at the necessary pace, creating a shortage of all housing, not just starter homes.

Today, with the high price of land, labor and permitting costs, it no longer makes economic sense to build small houses. For builders to make money, they often have to build larger homes, which carry higher price tags. So the number of starter homes has stayed stagnant while the surrounding population has grown. And prices have only continued to rise.

Real estate agents in Greater Portland now use the term “$500,000 starter home” without batting an eye.

Today, with “starter homes” hard to find, hard to afford and for many with low interest rates, hard to leave, that cycle isn’t progressing.

In some cases, it’s not even starting.

Homeownership rates for young people have been declining since the 1990s, especially in high-cost areas like southern, coastal Maine.

First-time homebuyers accounted for just 24% of national home sales between July 2023 and June 2024, the lowest percentage on record. According to the National Association of Realtors, the historical norm was 40% before 2008. First-time buyers are also older than they’ve ever been, with a median age of 38. In the 1980s, first-timers were, on average, in their 20s.

Unable to find their white-picket fence in their area, more young Mainers are finding alternative ways to make it work.

Many, like Lawry, are looking further afield.

Others have purchased multiunits, bought with friends or relatives, and moved into tiny or mobile homes.

For people stuck in their starter homes, they’re either making do or adding on.

Developers, meanwhile, are trying to redefine the entire concept. 

AFFORDABILITY IS KEY

While the traditional starter home is a post-war product, the idea – smaller, less-ornate homes for people of more modest means – has been around for centuries.

In Maine, the classic cape was the original Maine starter home, according to Scott Hanson, an architectural historian and owner of Hanson Historical Consulting.

Many have been bombed, burned and bulldozed.

The first “generation” of starter homes in Maine was lost in the British bombardment in the 1700s and the second in the Great Fire of 1866.

The 1950s saw the advent of the “mini cape,” which popped up in large developments by the hundreds. These houses were between 1,000 and 1,200 square feet, generally with two bedrooms and a bathroom.

“They could be built fast and they could be built cheap,” Hanson said, adding that parts of South Portland still have neighborhoods of several hundred such houses.

Around that time, starter homes cost between $7,000 and $12,000, according to Realtor.com, or about $89,000 to $155,000 if adjusted for inflation.

In Maine, the median sale price exceeded $400,000 for the first time last year. In Cumberland County, the median has come close to $600,000. On Feb. 3, there were only 15 single-family homes at or below $350,000 in Cumberland County on real estate listing site Zillow. None were in Portland. One of the homes, going for $325,000 in Scarborough, needed a full rehab, according to the listing.

These houses weren’t always so hard to come by.

Portland lost nearly 3,000 homes between 1967 and 1972 at the hands of urban renewal, a national effort to revitalize American cities by razing buildings and low-income neighborhoods to clear the way for private redevelopment.

The homes that were demolished had served as starter homes for successive waves of immigrants, but maintenance slipped during the Depression and World War II so “by the 50s they were looking pretty ratty,” though they were still structurally sound, Hanson said.

“Had they not been torn down, Portland’s housing crisis, as it’s commonly referred to, would be much different,” he said. “It not only shaped the landscape physically with the removal of buildings, it also brought in zoning that made the recreation of those traditional neighborhoods impossible.”

Hason argues that suburbanization and the creation of lot size minimums effectively killed the starter home.

In New England, the median lot size is just over half an acre – almost three times the national median, according to the National Association of Home Builders.

“The key to the starter home is that it’s affordable,” Hanson said. “If you’re going to require a half-acre, acre or 2 acres to put a house on, you’ve just made it that much more expensive to buy the land and also forced the houses to be farther apart, so the infrastructure costs are higher.”

Maine planners and lawmakers are working to undo these policies. A law passed in 2022 and enacted over the summer boosted density allowances across the state, requiring any land zoned for single-family use to allow for accessory dwelling units.

WHEN ‘STARTER’ BECOMES ‘FOREVER’

Derrick Buckspan, a broker/owner with RE/MAX Shoreline, has never liked the term “starter home.”

“Many times, housing does meet a time in our life, but the use is really in the eye of the beholder,” he said. “Who am I to say the first time you purchase your home isn’t where you’re going to stay forever?”

Increasingly, as high prices and interest rates keep people locked in place, that’s becoming the case.

When Jen VanDerburgh and her husband bought their three-bedroom, two-bath house in Windham 15 years ago, they didn’t intend to stay forever.

But Vanderburgh, now 42, was pregnant with their first child and the couple wanted to settle in before the baby was born. Then they had a second child, refinanced the house so VanDerburgh could stay at home with the kids, then had another baby.

With a family of five, the house got tight quickly, but it was never the right time to move.

They refinanced the house a second time when the interest rates dropped during the pandemic and added a half bathroom. Then housing prices shot up and interest rates jumped.

“We met with a real estate agent and it really felt like it was never going to be possible for us to find a home that would work for our family that wasn’t going to need an extensive amount of work,” she said. “It just seemed insane to uproot our lives for a house that we didn’t really like.”

So, the family worked with a contractor to build a 26-by-16 square-foot addition.

It’s nothing extravagant — a new master suite with a big closet, a mud room. It only added about $70 to the annual property taxes and it was more affordable than a new house.

“It’s going to be good enough. Our kids can grow and have their own space to be comfortable and we can function as a family,” VanDerburgh said. “There’s more space to put backpacks down and drop the bags after practice and it just makes everyone’s life a little less stressed … plus we never had to go through the stress of moving … and my kids don’t have to change schools.”

PLAYING CATCH-UP

State officials are trying to rebuild Maine’s depleted starter home stock.

The Maine State Housing Authority in 2022 announced the Affordable Homeownership Program, a $10 million effort to expand single-family home construction across the state.

The program is intended to incentivize developers to build subdivisions of modestly sized houses that would be affordable to people making up to 120% of the area median income. The houses are required to stay affordable.

The program complements some of the agency’s other initiatives, like its first-time homebuyers and first-generation homebuyers assistance programs.

“We’re playing a big catch-up,” said Scott Thistle, spokesperson for MaineHousing.

So far the program has helped create 38 homes, with another 96 under construction or in financing. Thistle said the agency has received applications for 234 more units, but there is no subsidy currently available.

Mark Patterson, co-owner of Patco Construction in Sanford, has built two subdivisions under the program — one in Sanford and the other in Waterboro — and hopes to build more. Patterson estimated that starter homes make up about 30% of the company’s business.

Five years ago, his company built a development of 960-square-foot homes that sold for about $180,000. Last year, those homes were selling for over $400,000, he said.

“There are people who have been priced out of homes completely, let alone new homes,” he said.

After almost a year of fruitless searching, Lawry and Martins had to commit to another year in their one-bedroom apartment in South Portland, which Lawry said is so small “you can have a conversation with somebody from one end of the apartment to the other without even raising your voice.”

Re-signing the lease put a pit in her stomach.

“It really pains me to spend over $20,000 a year in a place that I don’t even own,” she said. “To think that that could be going toward a house, but it can’t because we’re stuck in this renter cycle, is just really infuriating.”

FURTHER AFIELD

Liam Hunter had to travel 90 miles north to find his starter home.

Hunter, who had always lived in southern Maine, closed on his two-bedroom, one-bathroom home in Mexico in 2023 for $139,000.

He knew Portland and Biddeford were out of reach but, despite working two jobs, he could still only afford to buy far from home and with assistance from MaineHousing’s first-time and first-generation homebuyer programs.

“It made more sense to me to move outside of my area and my comfort zone and away from everything I’ve known and everyone I know to keep my living expenses down rather than jump into another apartment,” he said.

The 1930s bungalow has a tidy fenced-in backyard, a one-car garage and a sun-drenched front porch that Hunter, 46, said quickly became his favorite room.

The small house checked his most important boxes — like a full, dry basement and enough space for a few small gardens, but it also needs plenty of upgrades.

The oil heating system isn’t efficient, the linoleum in the kitchen is faded and damaged, and there’s no shower, just a bathtub that Hunter has retrofitted with a detachable shower head.

Despite the challenges, Hunter is happy in his home, with his many plants and Boris, the fluffy dog he was able to adopt because he finally has a yard. He doesn’t know if his starter home in Mexico really is a “starter” or if it’ll be home forever, but he’s proud to have his name on a mortgage.

“I worked very hard,” he said.

REINVENTING THE STARTER HOME 

While some want to simply build more starter homes, others want to reinvent it.

This summer, the Portland-based developers behind GreenMars Real Estate announced plans to build more than 200 housing units in Portland that would marry condominiums and accessory dwellings to create what it says is the “new-age starter home.”

Plans for two proposed developments include condos featuring an attached studio apartment that could be used for relatives in multigenerational households or as a rental for supplemental income.

Chris Marshall and Nate Green, GreenMars co-founders, said buying a multiunit in Portland used to be an attainable path to homeownership for anyone working a steady, middle-income job. It was a way to break into real estate, build equity and offset a mortgage by collecting rent from tenants.

But now, Marshall said, that seems like a pipe dream for anyone making less than $250,000 a year.

“Homeownership is a ladder,” he said. “But the bottom two or three rungs are missing.”

Cassie Symonds, a real estate agent with RE/MAX Shoreline, has noticed more first-time home buyers looking at multiunits, particularly owner-occupied duplexes.

“In years past, that wouldn’t be considered a starter home — it’s something an investor would do,” she said. “It’s interesting how many people are looking at that as a starter home.”

Marshall and Green aren’t the only ones envisioning a new kind of starter home.

Kara Wilbur is the developer behind modular housing company Dooryard.

Wilbur recently completed an 18-unit affordable housing development in Madison, with two nine-unit modular apartment buildings designed to look like large, classic New England-style homes. She has similar projects underway in Sanford, Rumford, Newcastle and Yarmouth. At least one of the projects also includes one small single-family home, between 400 and 900 square feet, with two bedrooms and one bathroom.

The “American Dream home” has created the idea that bigger equals better, and there isn’t a lot of middle ground.

“There’s this preconceived idea people have, especially in Maine, that there’s only one way and that’s a single-family house on a 1-acre lot,” she said.

Wilbur wants to show that small houses and apartments can be affordable and desirable, not just places that need to be tolerated because everything else is unaffordable.

Tom Landry, owner of Benchmark Real Estate in Portland, which is listing Wilbur’s Sanford development, said he has noticed more people reconsidering traditional homeownership.

“We have this selective nostalgia about Norman Rockwell’s version of the perfect American situation,” he said. “We need to redefine and think about the wonderful things that could happen if we go back to our roots.”

By “back to our roots, ” Landry means densely populated, walkable cities, multiunits and several generations under one roof. Compared with baby boomers, millennials want a different lifestyle, Landry said. They want to travel, have smaller families — they want something they can “lock and leave,” and so they’re drawn to apartments and condominiums, he said.

“Maybe the death of the starter home is an apartment, and that’s not bad,” Landry said.

MOVING ON

Josh Morse is loath to give up the sub-3% interest rate on the raised ranch in Hollis that he and his wife purchased in September 2020.

At $300,000, the house was right in the couple’s sweet spot and checked their biggest boxes. It was the perfect starter home on a quiet cul-de-sac with 1 acre of land perfect for their then 1-and-a-half-year-old daughter and their dog to play outside.

In the intervening years, Morse, 32, and his family have outgrown their home, which, while it technically has enough bedrooms for the now family of four, has a funky layout that’s not conducive to having two small children.

Plus, living in a more rural area, they miss the convenience of living closer to town.

“It was not a fun thought to be like, ‘Yeah, let’s enter the market when interest rates are 6% or higher,’ but I feel like if we waited for interest rates, we were never going to move,” he said. “And that’s the whole reason that no one is moving — there’s no movement in the market.

“At a certain point, the scale just tipped enough where it was like, ‘Well, we are outgrowing our house and we have other needs that we want to fulfill.’”

The couple purchased a new construction home in Saco that will be a better fit. They’re set to close this week.

They listed their Hollis home on Jan. 1 and after 23 showings and nine offers, were under contract by Jan. 7. The house sold for over 40% more than what they paid in 2020.

The additional money will help offset what would otherwise be a much larger mortgage payment for the roughly $575,000 house and higher interest rate.

“Now there’s a house that is not $600,000 that’s available for someone to move into because someone else decided to give up their rate,” he said.

Morse doesn’t say that to toot his own horn, he said, but to illustrate that something has to give.

“The market needs to be unlocked at some point,” he said.

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