The barriers towards homeownership continue to mount for more first-time homebuyers, with Zillow reporting that the number of million-dollar starter homes has tripled since 2019. In more than 200 U.S. cities, buyers will find a price tag of $1 million or more on the typical starter home.
In Zillow’s analysis, “starter homes” were defined as those in the lowest third of home values in a given region. Five years ago, only 84 cities across the nation had starter homes worth at least $1 million, but that has now jumped to a record high 237 cities. Exactly half of all states have at least one city with a typical starter home worth $1 million or more.
Throughout the rest of the nation, the typical starter home is worth $196,611, which is comfortably affordable for a median-income household. However, the housing shortage that worsened over the pandemic has propelled home prices to new heights. Starter home values grew 54% over the past five years, even more than the 49.1% increase for the typical U.S. home in the same time frame. Zillow analysts concluded that soaring costs of homes have delayed the first home purchase for many, pushing the median age of first-time buyers to 35 years old last year. That is a year older than in 2019.
Orphe Divounguy, a senior economist at Zillow, emphasized that homebuyers are battling affordability and availability so much that a $1 million starter home is a bargain in their region. Yet, he added, things may turn around first-time buyers soon enough.
“It's looking more and more like there will be some good news ahead for first-time buyers,” Divounguy said. “More homes are for sale, price cuts are on the rise, and buyers have a few more days to weigh their options as homes sit on the market.”
Zillow reported which states had the most cities with million-dollar starter homes. It found that 117 of those cities are in California. Far behind in second and third place are New York (31 cities) and New Jersey (21 cities). Florida and Massachusetts round out the top five with 11 cities each.
Among metropolitan areas, the New York City metro, which includes parts of New Jersey and Pennsylvania, has the most cities with million-dollar starter homes, at 48. The San Francisco metro has the next highest count at 44, followed by Los Angeles (35), San Jose (15), and Miami (8) and Seattle (8). Irvine, with a population of more than 300,000, is the biggest city with $1 million starter homes.
Zillow analysts also noted that markets with the most-restrictive building regulations tend to have more cities with $1 million starter homes. They are also markets with lower homeownership rates.
