SouthernWorldwide.com – The cost of housing in the United States continues its upward trajectory, with Zillow reporting that 242 cities now feature “starter homes” priced at $1 million or more.
This marks a significant increase, as the number of metropolitan areas with entry-level homes valued at seven figures has tripled since 2020. Zillow defines a starter home as one falling within the lowest third of home values in its respective region.
The surge in home prices was largely fueled by the pandemic. A combination of a housing shortage, robust demand, and historically low mortgage rates created a perfect storm for price escalation.
“The pandemic reset the cost of buying a home, spreading million-dollar starter homes from a handful of coastal states to more than two dozen states across the country,” stated Kara Ng, a senior economist at Zillow. This indicates a widespread impact beyond traditional high-cost areas.
It is important to note that the typical starter home across the U.S. still costs considerably less than $1 million, with Zillow placing the median price at just under $199,000. For context, the overall median home price in the country is nearly $418,000, according to the National Association of Realtors.
Affording even an average home has become a challenge for many households. Redfin data suggests that an annual income of nearly $117,000 is now required to purchase the typical home. This means a household earning the average income would need to allocate 40% of its earnings towards the median-priced home. Financial experts generally recommend keeping monthly mortgage payments below 30% of annual income, with a down payment of at least 15%.
The significant increase in high-priced starter homes is predominantly concentrated in California. Zillow’s analysis reveals that the state alone accounts for 105 cities where a basic property commands a price of at least $1 million. Ng also observed a growing trend of expensive starter homes emerging in the Northeast.
“Million-dollar starter homes are popping up in more Northeast cities because the housing shortage there hasn’t been solved,” she explained. “Sun Belt markets have responded with new supply and seen price growth moderate as a result. The Northeast hasn’t had that relief.” This highlights a regional disparity in market dynamics and supply responses.
Zillow’s findings further illustrate this national shift, indicating that 26 states now have at least one city with million-dollar starter homes, a substantial rise from the nine states that had such markets prior to the pandemic.
- California: 105
- New York: 41
- New Jersey: 26
- Florida: 11
- Massachusetts: 10
- Washington: 8
- Texas: 7
- Connecticut: 4
- Hawaii: 4
- Maryland: 4
- Colorado: 3
- South Carolina: 3
- Illinois: 2
- Wyoming: 2
- Arizona: 1
- Georgia: 1
- Kansas: 1
- Michigan: 1
- Minnesota: 1
- Missouri: 1
- New Hampshire: 1
- Nevada: 1
- Pennsylvania: 1
- Rhode Island: 1
- Utah: 1
- Virginia: 1
