Starter homes now cost $1 million in 242 U.S. cities, Zillow reports

Starter homes have crossed the $1 million mark in 242 U.S. cities, a threefold increase since 2020, Zillow reported. This surge in housing costs, particularly for entry-level properties, is largely attributed to the pandemic's impact on the market. A confluence of factors, including a persistent housing shortage, robust demand, and historically low mortgage rates, fueled the 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," said Kara Ng, a senior economist at Zillow. While the typical starter home still costs significantly less than $1 million, the trend highlights a dramatic shift in housing affordability.

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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.

California accounts for the majority of these high-priced starter markets, with 105 cities now featuring basic homes valued at $1 million or more. The Northeast is also experiencing a similar trend, with cities like those in New York and New Jersey seeing an increase in million-dollar starter homes. Ng noted that the housing shortage in these regions remains largely unsolved, unlike some Sun Belt markets that have seen price growth moderate due to new supply.

Overall, the median home price in the U.S. hovers around $418,000, with households needing an annual income of nearly $117,000 to afford it. Experts recommend keeping mortgage payments below 30% of annual income. The data indicates a growing divide in housing accessibility, with starter homes becoming increasingly out of reach for many aspiring homeowners.

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Million-dollar starter homes are popping up in more Northeast cities because the housing shortage there hasn't been solved.