A $1 million starter home is the new normal in over 200 cities

foxbusiness.com:

The Bahnsen Group founder and CIO David Bahnsen surveys the real estate market as younger homebuyers struggle with the ongoing housing crisis. 

A starter home used to be considered a smaller, but more affordable option for young families and other first-time buyers looking to enter the real estate market.

That may no longer be the case.

These days, the typical starter home is worth at least $1 million in 237 cities, the most ever, according to new findings published by Zillow. Five years ago, just 84 cities met that criteria. Zillow defines a starter home as being among those in the lowest third of home values in a given region.

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Nationwide, a starter home is worth about $196,611, which is «comfortably affordable» for a median-income household. But starter home values have surged 54.1% over the past five years, faster than the 49.1% increase seen for the average U.S. home during that same time frame. 

Homes in Hercules, California, on Aug. 16, 2023. (David Paul Morris/Bloomberg via Getty Images / Getty Images)

Half of all U.S. states have at least one city where the typical starter home costs at least $1 million. But more than half of those cities are located in California, where starter homes would cost buyers $1 million in 117 cities. New York came in second, with 31 cities, followed by New Jersey with 21. Florida and Massachusetts rounded out the top five, with 11 cities each.

There are a number of driving forces behind the affordability crisis. 

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Years of underbuilding fueled a shortage of homes in the country, a problem that was later exacerbated by the rapid rise in mortgage rates