Buying a “Starter Home” Now Costs $1 Million in Hundreds of U.S. Cities

How big can your biggest investment get? What used to be a modest first step into homeownership now carries a seven-figure price tag in hundreds of U.S. cities.

A new Zillow analysis found that a record 242 cities across 26 states now have typical starter homes worth at least $1 million, a figure nearly triple the 80 cities that had crossed that threshold before the pandemic in February 2020.

"The effects of the pandemic housing boom have proven durable," the report says. "A housing shortage a decade in the making ran headlong into intense demand, with mortgage rates at historic lows driving up home values at a record pace."

Zillow defines a "starter home" as one in the lowest third of home values within a local market. While the typical starter home nationwide is worth about $198,649, buyers in many metropolitan areas are facing dramatically higher entry costs.

Housing affordability remains a challenge

California still leads the nation with 105 cities where starter homes top $1 million. But the fastest growth has shifted east. New York added 10 cities over the past year to reach 41, while New Jersey added five, bringing its total to 26.

The New York City metropolitan area now contains 63 cities with million-dollar starter homes, followed by:

• San Francisco: 37
• Los Angeles: 33
• San Jose: 13
• Miami: 8
• Seattle: 8

Zillow says the market is still feeling the effects of the pandemic housing boom, when years of limited housing supply collided with historically low mortgage rates and surging demand, sending home prices soaring.

Conditions have improved somewhat for buyers. As inventory has slowly increased and home-price growth has moderated, Zillow estimates it now takes about six years for buying to become more cost-effective than renting, down from more than eight years in late 2023.

Even so, affordability remains a major hurdle for many first-time buyers.

Debt.com has previously reported that limited housing inventory, elevated mortgage payments, rising rents that make saving for a down payment more difficult, and higher construction costs continue to put homeownership out of reach for many Americans.

Planning before buying

While buyers can't control home prices or mortgage rates, they can control how prepared they are before beginning a home search.

Understanding how much home you can realistically afford can help you avoid taking on more debt than you can comfortably manage.

Debt.com's Mortgage Calculator can help estimate monthly payments based on home price, interest rate, loan term, taxes, and insurance. Buyers who are still building a down payment can also use Debt.com's Savings Calculator to estimate how long it may take to reach their savings goal.

If debt is making it harder to save for a home or qualify for a mortgage, Debt.com can help you understand your options. Call (855) 572-8232 to speak with a debt expert.