Million-dollar starter homes have become the norm in 237 cities across the United States. This dramatic increase reflects the ongoing housing shortage, which worsened over the pandemic and has driven home prices to new heights. The typical “starter home”—defined as being among the lowest third of home values in a given region—now carries a price tag of $1 million or more in these cities, a significant rise from just 84 cities five years ago.
The Escalating Cost of Starter Homes
Nationwide, the typical starter home is valued at $196,611, a figure that remains comfortably affordable for a median-income household. However, the value of starter homes has surged by 54.1% over the past five years, surpassing the 49.1% increase in the value of the typical U.S. home within the same period. This rapid appreciation has delayed the first home purchase for many prospective buyers. In 2023, the median age of a first-time homebuyer was 35, a year older than in 2019.
Regional Variations in Million-Dollar Starter Homes
Almost half of the cities with million-dollar starter homes are located in California, highlighting the state’s significant role in this trend. California boasts 117 such cities, followed by New York with 31 and New Jersey with 21. Other states with notable numbers include Florida and Massachusetts, each with 11 cities.
The New York City metro area, encompassing parts of New Jersey and Pennsylvania, leads with 48 cities featuring million-dollar starter homes. It is followed by the San Francisco metro area with 44 cities and Los Angeles with 35. Irvine, with a population exceeding 300,000, stands out as the largest city where starter homes cost $1 million or more.
Impact of Building Regulations and Market Dynamics
Metropolitan areas with the most restrictive building regulations tend to have the highest number of cities with million-dollar starter homes. These markets also exhibit lower homeownership rates, further complicating the affordability crisis.
Despite these challenges, there are signs of hope for potential buyers. The housing market is gradually balancing as the effects of rate lock ease and builders continue to add supply. With more homes available, buyers have more time to consider their options, and rising inventory levels are enhancing buyers’ negotiating power, as price cuts reach record highs for this time of year.
The Future of Million-Dollar Starter Homes
The emergence of million-dollar starter homes in 237 cities marks a significant shift in the U.S. housing market. This trend underscores the profound impact of the housing shortage and the pandemic on home prices. As the market continues to adjust, potential buyers may find more opportunities, but the era of affordable starter homes seems to be fading into the past. The million-dollar starter homes phenomenon is a stark reminder of the evolving landscape of homeownership in America.
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