A home with a price tag of a million dollars is no longer a guarantee of luxury.
According to a new Zillow report, first-time homeowners in more than 200 U.S. cities will have to shell out about $100,000 for a typical starter home analysis.
In the real estate market, a ‘starter home’ is defined as a home that falls within the bottom third of home values in a given region.
The study found that the average starter home has surpassed this staggering price point in 237 U.S. cities, nearly triple the price of just five years ago, when it was 84.
Nearly half of the cities are in California, a country notorious for its high housing prices. But exactly half of all states have at least one city where a million-dollar starter home is the norm.
Nearly half of the cities are in California, an area notorious for its high housing prices (Pictured: a street in San Francisco)
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According to Zillow, starter homes in these cities cost more than five times the national average of $196,611. That’s more than enough for a middle-income household.
The housing shortage, exacerbated by the Covid-19 pandemic, has pushed US home prices to new highs.
The value of starter homes has increased by 54.1 percent since 2019, even more than the 49.1 percent increase for the average U.S. home during the same period.
As a result, many potential home buyers have been priced out of the market and millions of people have postponed the purchase of their first home.
According to Zillow, the average age of first-time homebuyers in 2023 was 35, up one year from 2019.
In California, there are 117 cities where the average starter home costs more than $1 million, including Santa Monica, Montecito and Carmel Valley.
That number has more than doubled since 2019, when 53 people lived there.
California is well ahead of New York, which has 31, and New Jersey, which has 21.
Florida and Massachusetts round out the top five with 11 each. While the Sunshine State had four cities with million-dollar starter homes five years ago, Massachusetts had none.
States like Utah, Illinois, Missouri and Kansas didn’t have a single city with million-dollar starter homes in 2019, but now they all do.
In Utah, for example, that’s Alta, a ski town near Salt Lake City, and in Kansas it’s Mission Hills, a suburb of Kansas City.
Exactly half of all states have at least one city where a million-dollar starter home is the norm (Pictured: Seattle, Washington, where eight cities are located)
“Homebuyers are struggling with affordability and availability,” said Orphe Divounguy, senior economist at Zillow
Irvine, California, has a population of more than 300,000 and is the largest city with $1 million starter homes, Zillow found.
Of all metropolitan areas, the New York City metropolitan area, which includes parts of New Jersey and Pennsylvania, has 48 cities with million-dollar starter homes, the highest number in the country.
The metropolitan area of San Francisco has 44, Los Angeles 35, San Jose 15, and Miami and Seattle each have eight.
“Homebuyers today are struggling with affordability and availability, so much so that $1 million is the norm for a starter home in hundreds of cities,” said Orphe Divounguy, senior economist at Zillow.
However, it increasingly appears that there is good news for first-time home buyers.
“There are more and more homes for sale, prices are continuing to drop and buyers still have a few days to consider their options as homes remain on the market.”
This comes as experts warn that home prices in pandemic-hit boomtowns in the South will fall dramatically.
Recent reports already indicate that parts of Florida and Texas are seeing a decline in increased costs.