Starter homes cost more than $1 million in a record 237 cities

A record number of US cities now have typical starter homes worth at least $1 million, Zillow reported.

On average, homebuyers can find seven-figure starter properties in 237 cities, the firm said, a considerable jump from where values stood five years ago. According to the real-estate agency, only 85 cities had such high prices back then.

Zillow defined typical starter homes as properties in the lower third of values. Given that they’re generally on the more affordable side of the market, these serve as an entryway for first-time buyers.

But instead, their recent sharp appreciation likely puts them out of reach for many potential consumers, reflecting a broader pain buyers are facing in the market.

Surging demand and limited home supply have amplified housing unaffordability in recent years. High interest rates have only added to the scarcity problem, as these elevated borrowing rates discouraged many owners from selling.

Buyers have also had to face off against property investors, who snapped up a record share of low-priced homes in 2023’s final quarter.

Zillow reported that starter home prices surged 54.1% in the five-year timeframe, outpacing the 49.1% appreciation of typical US homes.

To be sure, the typical starter home is worth $196,611 nationally, which Zillow considers an affordable price tag for the median-income buyers. But, $1 million starter homes can be found in nearly half of all states, it said.

California leads this trend, holding 117 of these cities. New York followed at 31, ahead of New Jersey at 21.

This line-up is identical to a Zillow report from April, which tracked the amount of average US homes worth $1 million. As with starter properties, a record amount of cities saw average home prices reach these highs.

High costs and elevated mortgage rates have recently dented buyer appetite, which Zillow notes could bring about a more balanced market. In June, prices were slashed on nearly a quarter of listed homes, as existing home sales fell to nearly their slowest pace since 2010.