The number of cities where starter homes carry a price tag of $1 million or more has almost tripled since 2019.
A recent analysis by Zillow reveals that 237 cities now fall into this category, a dramatic increase from 84 cities five years ago. The typical starter home, as defined for this analysis, is one that falls into the lowest third of home values in a given region.
Nationwide, the typical starter home is just under $200,000.
California Leads the Charge of Cities with $1M Starter Homes
California dominates the list, with 117 cities where starter homes cost $1 million or more. This is up from 53 cities in 2019. California also has the highest number of cities where the typical home is at least $1 million at 210 cities.
Here are all the states that made the list for cities with starter homes costing $1 million or more:
- California: 117 cities (up from 53 in 2019)
- New York: 31 cities (up from 13 in 2019)
- New Jersey: 21 cities (up from 2 in 2019)
- Florida: 11 cities (up from 4 in 2019)
- Massachusetts: 11 cities (up from 0 in 2019)
- Washington: 8 cities (up from 5 in 2019)
- Texas: 7 cities (up from 1 in 2019)
- Hawaii: 5 cities (up from 1 in 2019)
- Connecticut: 4 cities (up from 0 in 2019)
- Colorado: 3 cities (up from 1 in 2019)
- Wyoming: 3 cities (up from 0 in 2019)
- Maryland: 2 cities (up from 1 in 2019)
- South Carolina: cities (up from 1 in 2019)
Arizona, Georgia, Kansas, Michigan, Minnesota, Missouri, Nevada, New Hampshire, Virginia, Illinois, Rhode Island and Utah all have one city with starter homes costing at least $1 million.
Factors Driving the $1M Starter Home Trend
The housing shortage, which worsened during the pandemic, drove up the cost of all homes. While the typical U.S. home has increased by 49.1% since 2019, starter home values increased even more—by 54.1%.
As far as cities with higher-than-average starter home values, Zillow’s analysis found that markets with the most restrictive building regulations tend to have a higher number of cities with million-dollar starter homes. These areas also typically have lower homeownership rates, underscoring the barriers to entry for first-time buyers.
Hope for First-Time Buyers
Despite these statistics, there are areas of opportunity for first-time buyers. For one thing, the typical starter home nationwide is worth $196,611, according to Zillow’s June Housing Market Report. Searching for starter homes in affordable housing markets allows median-income earners to comfortably afford monthly payments.
In addition, recent data shows a slight easing of market conditions, providing more opportunities for first-time home buyers.
“Home buyers are battling affordability and availability today. So much so that $1 million is the norm for a starter home in hundreds of cities. 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.”
