When the starter home becomes the forever home

Amid high mortgage rates, soaring housing prices and a stubbornly tight market, here’s how families are stretching the space they have

Vickie Franzen and her husband, Jon Crenshaw, bought their home in Roseville, Calif., in 2018. Now they’re figuring out how to make it work for their growing family. (Photos by Chloe Aftel for The Washington Post)

When Vickie Franzen and her husband, Jon Crenshaw, bought their first house in Roseville, Calif., in 2018, they never expected they would still be there in 2024, weighing whether to squeeze a desk into the nursery along with the crib, so the space could double as an office.

Both tech workers, they chose the three-bedroom, two-bathroom abode because it seemed like the perfect starter home. That was before the pandemic turned them both into full-time remote workers (only Crenshaw had been working from home). Before the former guest room became an office. Before they got pregnant with their first kid.

Suddenly, the house’s 1,600 square feet feel like a way tighter squeeze. But there’s another number they can’t get out of their minds, either: 3.5 percent, their current mortgage rate, which they scored by refinancing in 2020 and aren’t eager to give up.

Their quandary isn’t unique, of course. Today’s high interest rates and low housing affordability mean that all across the country, homeowners just like them — people who thought they were buying good-enough-for-now houses that they would leverage into dream homes soon enough — are having to reevaluate. Not that Franzen and others in her situation aren’t grateful to own a home, given the current market conditions. But turning a starter home into something closer to a forever home requires compromise, from sacrificing space to putting off having children.

Last October, Franzen considered upsizing to a larger home, but once she and her husband took a look at the market, they quickly retreated. Prices in their area, a suburb of Sacramento, had shot up more than 35 percent since they had last house-hunted. Add in higher interest rates, Franzen says, and “we couldn’t afford our current home now,” let alone a bigger one.

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The inventory didn’t wow them, either. (As of November, new listings nationwide were down more than 14 percent compared with pre-pandemic levels, according to Zillow.) “We’re talking ’70s shag carpeting and kitchens you would have to redo,” she says. “Selling [our home] right now just seems like the worst idea possible.”

So, instead, she and Crenshaw are modifying it. They put a mini-split in their sunroom to heat and cool it, so they can use the space the entire year. Now it does triple duty as a dining room, greenhouse and place to brew beer. They don’t park in the garage, instead using it as a staging ground for baby furniture in anticipation of their June due date.

“We’ve had a lot of conversations,” Franzen says. “Especially with expecting a little one, we’re like, do we move? Do we not move? And we’ve committed to making this house work.”

These days, a lot of homeowners are having those debates. Heather Devoto, vice president of the McLean, Va., branch of First Home Mortgage, describes many of her consultations with clients lately as “therapy calls.”

“I spend more time on the phone now with people, listening and trying to help them, and [doing] a lot of hand-holding,” she says. “They’re just like, ‘We’re just stuck.’”

Devoto says multiple clients have told her that they’re holding off on having a second child because of this limbo. “People are thinking about their lifestyles in a different way and not sure what to do,” she says. “There is a lot of soul-searching that people are doing right now.”

Within the past year, the majority of Devoto’s clients have been first-time home buyers because they don’t have a low interest rate to hang onto, she says. More than 6 in 10 current homeowners have an interest rate below 4 percent, according to Redfin, and about a quarter have one below 3 percent. As of this story’s publication, the average rate hovered around 6.25 percent.

Logically, as homeowners stay put, they consider whether to renovate. But acquiring a loan to fund a remodel can be costly. Renovation loans functionally refinance a mortgage at the current interest rate. And home equity lines of credit typically come with either adjustable rates or rates fixed at a high number.

Still, many families are finding that renovations are the way to go. According to research from home-service site Angi, 40 percent of homeowners reported undertaking more home improvement projects in 2023 because high interest rates made moving less of an option.

Molliee Marechal and her husband are among them. After researching what it would cost to buy a new home, they opted to renovate the San Francisco Bay-area house they bought in 2013 and refinanced during the pandemic.

When they first saw the three-bedroom, one-bathroom ranch house more than a decade ago, Marechal says that it reminded her of where she grew up and that she loved that the neighborhood was full of kids. “We have a huge tree in our front yard,” she says. “It just appealed to us.” It needed work even then — they added a primary suite shortly after moving in — but as a starter home, it was ideal.

Three children later, it’s a different story. “There’s not enough room for our girls’ clothes in their tiny closet. They were sharing a room. We were just like, ‘We have outgrown this house,’” she says. “We agonized. We went home shopping. We looked at probably 10 different homes.”

What they learned was that even with a sizable renovation — they’re adding two bedrooms, a bathroom, a laundry room and relocating the garage — “long term, we are still saving money versus buying a brand new house,” says Marechal, if you take into account higher interest rates, moving costs and personalizing a new space. Plus, the family gets to stay in the neighborhood they adore.

Tim Haugh, who bought a three-bedroom house in San Jose in 2020, also doesn’t see how his family could move. “We’re locked in,” he says. “Unless something drastic happens, like we hit the lottery or something.”

He and his wife have a 3 percent mortgage rate. Even if they could pay the same price for their house today, Haugh says, “with the interest rates, I think [it would be] more than double the mortgage payment, which is just insane.”

Since moving in, the couple has had two kids — always the plan, though it happened faster than anticipated. Rather than adding square footage to the house, Haugh and his wife are focusing on upgrading the yard to give their daughters additional play space.

That decision aligns with what Allison Messner, CEO of landscaping design service Yardzen, says she has lately seen among clients. As more families stay in their homes longer, she says, the are asking to add to the yard’s fun factor with features such as fire pits, plunge pools and dedicated kids’ areas.

Beyond the outdoor upgrades at his home, Haugh says, “it’s a game of, do we maybe one day think about converting our garage” into an additional room, as some neighbors have.

Though, “everything is so expensive these days,” he says.

But at some point, people will have to start moving again — right?

Desiree Gaeta, a real estate broker in Charlotte, says she has been advising clients to rethink their definition of a “low” interest rate. “All of us are expecting interest rates to drop down just a little bit in 2024 and stabilize,” she says. “But for now, it’s not going back down to that 2 to 3 percent. And I think people are starting to get to that realization that that was just a very unique situation that happened.”

For all the ways that buying or selling a home is about the hard data, there is also psychology involved. A 5 percent interest rate seems like a lot compared with 3 percent, but it certainly looks a lot better than 8 percent. And aside from getting used to the new normal, Skylar Olsen, chief economist at Zillow Group, predicts people will slowly get back into the housing market, simply because life happens.

“People move because they have a lifestyle change,” she says. “Why we will get back to normal and the housing market will recover is that enough of us will go through divorces and deaths and we’ll have babies and things will change.”

Back at Vickie Franzen and Jon Crenshaw’s house in Rosemont, Calif., they’re still working out the floor plan of the nursery — or perhaps the nursery-slash-office. As more baby stuff piles up, Franzen says she’s constantly searching for new ways to reconfigure or repurpose the home’s various closets and alcoves to “find a little more space.” But those solutions won’t work forever.

“We are expecting another member of the family, and at some point, they will need a dedicated space that is just for them,” she says. “I have a feeling that if interest rates haven’t gone down by the time they’re 2 or 3, we’re not going to have a choice [but to move].”

Until then, she and her husband will be preparing by paying down debt and saving for a bigger down payment on the next home. That way, she says, “we’re not afraid about the interest rate.”

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