Fix-and-flips Fill A Critical Entry-level Home Vacuum, Data Reveals

Fix-and-flip investors brought more homes to entry-level market homebuyers in 2025 than homebuilders, a new data analysis from real estate investment platform New Western asserts. 

The report defines starter homes as those priced at $261,000 and below. While there aren’t many homes available at that price point in a wide range of major cities, many smaller municipalities, rural areas and exurban communities can still feature homes below that threshold. 

According to the report, local independent investors delivered 120,193 homes priced below $261,000 in 2025. While those homes aren’t regarded as new builds, some of them were either uninhabitable or vacant for extended periods of time – prior to their renovations – due to a lack of maintenance and repairs. 

According to The Brookings Institution, about 1.1% of all housing units were removed from the nation’s housing stock each year between 1985 and 2013, either because of demolition or becoming obsolete. The annual losses were more pronounced in rural regions, at 1.6%.

By revitalizing these barely habitable homes, largely located in rural areas and dilapidated urban neighborhoods, small, independent investors serve a key role in tackling America’s housing crisis, the report argues. 

“They aren’t building subdivisions; they’re revitalizing existing homes that would otherwise remain underutilized and returning them to productive use,” Kurt Carlton, Co-Founder and President of New Western, said in a provided statement. 

In comparison, homebuilders sold 37,931 homes below that price threshold last year, the report claims. The median sales price of new homes sold in December was $414,000, according to U.S. Census Bureau data.

New homes are still supersized

Data from the National Association of Home Builders reveals that, as affordability constraints mount, the average new home continues to decline in size, from 2,465 square feet in 2015 to 2,155 square feet last year. 

Additionally, Lending Tree reports that smaller homes are more common than they used to be, as 25% of new single-family homes sold in 2024 clocked in under 1,800 square feet, up from 17% in 2014. 

However, the nation’s homebuilders still aren’t building as many starter homes as they once did. 

The median square footage of existing homes that were built in the 1960s or earlier is roughly 1,500 square feet, according to Census data. In the 1940s and 1950s, new houses less than 1,000 square feet were common, but only about 1.5% to 2.0% of new single-family homes sold in 2024 were less than 1,000 square feet. 

At the same time, smaller homes, in the form of accessory dwelling units, have made a comeback and are increasingly seen by many states and municipalities as a solution to the affordable housing crisis.

States, led by California, have revised their zoning and land use regulations to make it easier to build ADUs, many of which are smaller than 1,000 square feet.