Hundreds of U.S. cities now have starter homes that cost $1 million, Zillow finds

As U.S. housing costs continue to climb, 242 cities across the country now have “starter homes” costing at least $1 million, according to Zillow.

The number of metropolitan areas with basic homes worth at least seven figures has tripled since 2020, the real estate firm said in a new analysis. Zillow defines a starter home as one in the lowest third of home values in a given region.

Home prices surged during the pandemic as a housing shortage collided with strong demand and historically low mortgage rates.  

“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,” Kara Ng, senior economist at Zillow, said in a statement. 

To be sure, the typical starter home still costs far less than $1 million at just under $199,000, Zillow noted. Overall, the median home costs nearly $418,000, according to the National Association of Realtors. 

Households need annual income of nearly $117,000 to afford the average home, according to Redfin. A household with average earnings would need to spend 40% of its income on the median-priced home, the real estate firm found. Experts generally advise keeping monthly mortgage payments to no more than 30% of annual income after putting 15% down.

Soaring real estate prices in cities across California account for most of the high-priced starter homes. The state has 105 cities where a basic property costs at least $1 million, according to Zillow. Pricey starter homes are also becoming more common in the Northeast, Ng said.

“Million-dollar starter homes are popping up in more Northeast cities because the housing shortage there hasn’t been solved,” she said. “Sun Belt markets have responded with new supply and seen price growth moderate as a result. The Northeast hasn’t had that relief.”

A total of 26 states have at least one city with million-dollar starter homes, up from nine before the pandemic, Zillow found:

• California: 105
• New York: 41
• New Jersey: 26
• Florida: 11
• Massachusetts: 10
• Washington: 8
• Texas: 7
• Connecticut: 4
• Hawaii: 4
• Maryland: 4
• Colorado: 3
• South Carolina: 3
• Illinois: 2
• Wyoming: 2
• Arizona: 1
• Georgia: 1
• Kansas: 1
• Michigan: 1
• Minnesota: 1
• Missouri: 1
• New Hampshire: 1
• Nevada: 1
• Pennsylvania: 1
• Rhode Island: 1
• Utah: 1
• Virginia: 1