Hundreds of U.S. cities now have starter homes that cost $1 million, Zillow finds
In the United States, the cost of housing continues to rise, with 242 cities now boasting “starter homes” priced at $1 million or more, according to a recent analysis by Zillow. This represents a significant increase from 2020, when the number of metropolitan areas with million-dollar starter homes was much lower.
Zillow defines a starter home as one that falls within the lowest third of home values in a given region. The surge in home prices can be attributed to factors such as a housing shortage, high demand, and historically low mortgage rates, all of which were exacerbated by the COVID-19 pandemic.
Despite the increase in million-dollar starter homes, the typical starter home still costs less than $1 million, coming in at just under $199,000. The median home price nationwide is nearly $418,000, according to the National Association of Realtors.
Households looking to afford the average home need an annual income of nearly $117,000, according to Redfin. This means that a household with average earnings would need to allocate 40% of its income towards the median-priced home. Experts typically recommend keeping monthly mortgage payments to no more than 30% of annual income after a 15% down payment.
Most of the cities with million-dollar starter homes are located in California, where 105 cities have basic properties priced at $1 million or more. The Northeast is also seeing an increase in high-priced starter homes, with 41 cities in New York and 26 cities in New Jersey fitting this criteria.
According to Zillow, a total of 26 states now have at least one city with million-dollar starter homes, up from nine prior to the pandemic. These states include California, New York, New Jersey, Florida, Massachusetts, Washington, Texas, Connecticut, Hawaii, Maryland, Colorado, South Carolina, Illinois, Wyoming, Arizona, Georgia, Kansas, Michigan, Minnesota, Missouri, New Hampshire, Nevada, Pennsylvania, Rhode Island, Utah, and Virginia.
The Northeastern housing shortage has contributed to the proliferation of million-dollar starter homes in the region, as opposed to Sun Belt markets where new supply has helped moderate price growth. It remains to be seen how these trends will continue to evolve in the coming years.
