Real Estate

Starter homes and ‘nepo-babies’

When prices and mortgage rates are sky high, the haves are the only ones buying, and the have-less are not. PHOTO: Bishnu Sarangi - Pixabay

The book just closed on September — perhaps the most critical month of the year for residential real estate. The numbers aren’t available just yet, and so it will be a short while before we know how the San Francisco market fared.

In its September 2023 report, however, the real estate company Compass said that it expected to see substantial activity this fall. 

“Historically speaking, September is often the single month of the year with the highest number of listings,” the report said. “Luxury home listings in San Francisco commonly see a particularly large spike in autumn sales.”

We shall see in the coming days whether this holds true.


Nationwide, rising home prices and elevated mortgage rates have pushed the income necessary to buy the typical U.S. starter home up 13 percent over the last year.

But according to Redfin, that’s not the case in San Francisco. Of course, this will be of little comfort to would-be buyers, because the price of a starter home in the city is still astronomical. 

“A homebuyer in San Francisco must earn $241,200 per year to afford the typical ‘starter’ home, down 4.5 percent ($11,300) from a year earlier,” according to Redfin.

For the country as a whole, a first-time homebuyer must earn roughly $64,500 per year to afford the typical U.S. starter home, up 13 percent ($7,200) from a year ago. That’s due to the one-two punch of higher mortgage rates and higher home prices.

San Francisco, Austin, and Phoenix buyers don’t need to earn quite as much as they did a year ago to afford a starter home, as those are the only three major U.S. metros where prices have declined. 

According to Redfin, starter-home prices are falling in these three metros after skyrocketing in 2020 and 2021. Bay Area prices soared because buyers used record-low mortgage rates as an opportunity to jump into the expensive market, and Austin and Phoenix prices went wild because of the influx of remote workers moving into those places.  

Now that mortgage rates have more than doubled, the initial surge of remote work relocations has passed, and new listings are scarce due to homeowners locked in by low rates, the housing markets in Austin and Phoenix have fallen back down to earth. 

Meanwhile, demand in San Francisco has dropped because rising rates have made ultra-expensive homes even more expensive, and because it’s still not as important as it once was for tech workers to live in or near the city.


So who can afford San Francisco’s very expensive starter homes these days? 

According to an article recently published on, it may very well be a nepo baby. It turns out that 38 percent of recent U.S. homebuyers under age 30 used either a cash gift from a family member or an inheritance in order to afford their down payment.

“First-time homeownership has become increasingly expensive, which has shut the door to homeownership for young people without family money. As a result, a large share of young homeowners can be labeled ‘nepo-homebuyers,’ meaning they received family money to purchase a home,” writes Daryl Fairweather in the Forbes piece. “This phenomenon contributes to intergenerational wealth inequality and limits economic opportunities for young people and their families.”

It is rare for a young person to be able to afford a home. Senior Americans (65 and older) are about two times more likely to be homeowners than young Americans (under 35).

The Hollywood Reporter refers to these same privileged young buyers as nepo babies, and says there is a home-buying spree going on in Los Angeles. 

The publication explains that in an uncertain economy, real estate is seen as a more secure way of holding on to wealth and generating income through renting or flipping. 

The article quotes Tomer Fridman of The Fridman Group at Compass, who said, “When a family is affluent and has business acumen, they instill that in their children, and oftentimes this begins with a real estate acquisition. Many of my high-net-worth clients hold a substantial amount of wealth in real property, and their children start purchasing property early on.”

What’s more, research from economists at the University of Chicago found that children born to homeowner parents are significantly more likely to be homeowners in adulthood. And according to a 2021 Redfin survey of about 1,500 homeowners, 79 percent of current homeowners had a parent who owned a home, and 67 percent had a grandparent who owned a home.

Surely some of this is taking place in San Francisco. The widening gap between the haves and have-nots is certainly troubling, but it seems inevitable that this would be the case when home prices are so high, and out of reach for so many.

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