Buying a starter home is becoming increasingly expensive across the U.S., with entry-level homes now costing at least $1 million in a record 242 cities, according to a Zillow analysis published Monday.

The number of cities with million-dollar starter homes has nearly tripled from 80 in February 2020, highlighting how pandemic-era housing pressures continue to reshape affordability across the country.

Zillow defines a starter home as a home in the lowest third of home values in a given region. While the typical starter home nationwide is still worth $198,649, million-dollar entry-level homes are spreading well beyond traditional high-cost coastal markets.

Pandemic Pricing Shift

Zillow said the pandemic fundamentally reset the cost of homeownership as a long-standing housing shortage collided with strong demand and historically low mortgage rates, driving home values sharply higher.

"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," Zillow senior economist Kara Ng said.

A total of 26 states now have at least one city with million-dollar starter homes, up from just nine before the pandemic.

California continues to lead with 105 cities where starter homes cost at least $1 million. But growth has accelerated in the Northeast. New York now has 41 such cities, up from 12 before the pandemic, while New Jersey has 26, up from just one.

Ng said million-dollar starter homes are becoming more common in Northeast markets because housing shortages there remain unresolved, while Sun Belt markets have added supply and seen price growth moderate.

Affordability Pressure Builds

The Zillow report adds to broader signs of strain in the U.S. housing market.

Economist Mohamed El-Erian recently warned the U.S. housing market remains "extremely unaffordable," citing data showing homebuyers now spend roughly 42% of their income on housing costs.

Overall, the median U.S. home now costs nearly $418,000, according to the National Association of Realtors.

Redfin data also showed households need an annual income of nearly $117,000 to afford the average home, underscoring the growing pressure on buyers.

The cost burden extends beyond mortgage payments. A recent Clever Real Estate report found the average homeowner spends nearly $24,000 annually on housing expenses outside mortgage payments, rising to about $28,000 when HOA fees are included.

At the same time, buyers are becoming more price sensitive. Recent Redfin data showed more sellers are pulling homes off the market as elevated mortgage rates and affordability pressures reduce buyer demand.

Zillow noted conditions are gradually becoming more favorable for financially prepared buyers as inventory improves and price growth slows. The typical buyer now breaks even relative to renting after roughly six years, down from more than eight years in late 2023.

The New York City metro area leads all U.S. metro regions with 63 cities where a starter home costs at least $1 million, followed by San Francisco with 37 and Los Angeles with 33.

Disclaimer: This content was produced with the help of AI tools and was reviewed and published by Benzinga editors.

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