Zillow Reports Starter Homes Hit $1 Million Mark In 237 Cities

Gone are the days when $1 million bought luxury living.

According to a Zillow analysis, that price tag is the new normal for a starter home in 237 U.S. cities. This is a mind-boggling shift from just five years ago when only 84 cities commanded a hefty price tag for a basic dwelling.

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The culprit behind the dramatic increase is a perfect storm of factors, primarily a severe housing shortage that's been intensifying since the pandemic. While the typical U.S. home price has skyrocketed by nearly 50% in the past five years, starter homes have seen an even more alarming surge of 54.1%.

This unprecedented affordability crisis has a ripple effect, delaying homeownership dreams for countless people. The average age of first-time homebuyers has climbed to 35, a full year older than in 2019. This reality underscores the challenges facing young adults eager to step onto the property ladder.

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"Homebuyers are battling affordability and availability today – so much so that $1 million is the norm for a starter home in hundreds of cities," Zillow Senior Economist Orphe Divounguy said. "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."

Half of all U.S. states now boast at least one city where the typical starter home costs $1 million or more. California reigns supreme with 117 cities in that category, far outpacing New York and New Jersey, which have 31 and 21 cities with million-dollar-plus starter homes, respectively. Florida and Massachusetts tie for the fifth spot with 11 cities each where the typical starter home costs at least $1 million.

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The California Association of Realtors reported that the median home price in the state skyrocketed to $904,210 in April, an 11.4% increase compared to last year.

Major metropolitan areas like New York City, San Francisco, and Los Angeles lead the pack in terms of million-dollar starter homes. However, these cities, along with others facing restrictive building regulations, have seen homeownership rates decline.

The Zillow study emphasizes the need for more homes. Freddie Mac has said the United States needs an additional 1.5 million homes to meet demand.

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