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Starter homes used to be considered the snug and accessible option for young people and families who are just starting out. But in hundreds of cities across the U.S., that’s no longer the case.
Today, a typical “starter home” costs $1 million or more in a whopping 237 U.S. cities, according to a new report by real estate site Zillow. That’s nearly triple the number of cities where that was the case in 2019. Zillow defines a starter home as the lowest third of home values in a region.
Almost half of those cities are in California, where typical starter homes would put buyers out at least $1 million in 117 cities. The runner-up is New York, with 31 cities, followed by New Jersey with 21. Florida and Massachusetts each have 11 cities where a starter home would have a seven-digit price tag.
Housing affordability has become one of the biggest burdens on Americans in the years since the pandemic. The combination of inflation and high mortgage rates have caused existing homeowners to stay put, meaning there’s less supply on the market, which pushes prices upwards. The median home sale price reached a record $442,525 in June, with the average rate on a 30-year mortgage coming in at 6.92% — roughly double pandemic-era lows.
The average starter home is worth $196,611 in the U.S. — a figure that has grown 54.1% over the past five years. This increase has led to a rise in the median age of a first-time home buyer to 35 years, as of last year. In 2019, the median age was 34.
Prospective home buyers could see some relief on the horizon, however. Inventory has begun to pile up as people remain hesitant to buy in this market. This is starting to put pressure on sellers — especially those itching to get rid of properties as quickly as possible — to lower prices. Almost a quarter of listings last month received a price cut — the highest rate for this time of year recorded by Zillow since 2018.