Housing affordability crisis deepens as starter home prices soar
A $1 million price tag, once synonymous with luxury living, is now the standard for starter homes in over 200 US cities.
A new Zillow analysis revealed that 237 cities now have a median starter home price of $1 million or more. This marks a significant increase from just five years ago when only 84 cities had starter homes valued at $1 million or above, highlighting the growing affordability crisis, particularly for first-time buyers.
“Home buyers are battling affordability and availability today,” Zillow senior economist Orphe Divounguy said. “So much so that $1 million is the norm for a starter home in hundreds of cities.”
Nationwide, the typical starter home is valued at $196,611, which remains affordable for a median-income household. However, a severe housing shortage, exacerbated by the pandemic, has driven the cost of all homes to unprecedented levels.
Over the past five years, starter home values have surged by 54.1%, outpacing the 49.1% increase for the typical US home during the same period. This rise in prices has delayed homeownership for many, with the median age of first-time homebuyers reaching 35 last year, up from 34 in 2019.
Half of all US states have at least one city where the typical starter home is worth $1 million or more. California leads with 117 such cities, followed by New York (31), New Jersey (21), Florida (11), and Massachusetts (11).
“Markets with the most-restrictive building regulations tend to have more cities with $1 million starter homes,” Zillow noted in the report. “They are also markets with lower homeownership rates.”
Among metropolitan areas, the New York City metro, which includes parts of New Jersey and Pennsylvania, has the highest number of cities with million-dollar starter homes at 48. The San Francisco area followed with 44 cities, while Los Angeles has 35. San Jose features 15, and both Miami and Seattle have eight cities each with million-dollar starter homes. Irvine, California, with a population of over 300,000, is the largest city where starter homes are priced at $1 million.
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Divounguy offered a glimmer of hope for potential buyers: “However, it’s looking more and more like there will be some good news ahead for first-time buyers. 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.”
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