A record number of 242 cities have starter homes valued at $1 million or more, up from 226 one year ago, according to a new data report from Zillow.
Traditionally, a starter home is defined as a home in the lowest third of home values in a given market. But as the housing market has become more expensive and supply is below pre-pandemic levels, starter homes in many markets could be considered luxury real estate.
“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,” said Kara Ng, senior economist at Zillow. “But while it may feel like a market of beer tastes at champagne budgets, those million-dollar starter homes are still the exception. More inventory, slower price growth, and a narrowing rent-versus-buy gap mean buyers who are financially prepared are generally in better shape than in recent years.”
California leads overall with 105 cities on Zillow’s list, and 26 states now have at least one city with million-dollar starter homes. However, six of the 10 most competitive housing markets in the country are in the Northeast, where new construction has lagged and inventory deficits run deep. Zillow found New York and New Jersey are the fastest-growing states on the list will $1 million-plus starter homes, adding 15 cities combined in the past year – New York’s total has reached 41 while neighboring New Jersey has grown to 26.
Ng added, “Million-dollar starter homes are popping up in more Northeast cities because the housing shortage there hasn’t been solved. Sun Belt markets have responded with new supply and seen price growth moderate as a result. The Northeast hasn’t had that relief. Eliminating barriers to building like restrictive zoning is the most direct path to improvement, which is something Zillow is actively advocating for across the country.”
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