First-time homebuyers in 237 cities are finding the typical starter home is priced at $1 million or higher, according to new data from Zillow (NASDAQ:Z, ZG). Five years ago in the pre-pandemic housing market, only 84 cities offered $1 million starter homes.
Nationwide, the typical starter home is worth $196,611. However, starter home values have grown 54.1% over the past five years, whereas the typical home saw their prices rise 49.1% om the same period. Furthermore, the current median age of a first-time homebuyer of 35 is a year older than in 2019.
However, the market for these pricey starter homes is not evenly spread across the country. Exactly half of all states have these expensive properties, while 117 of the cities with $1 million starter homes are in California, followed by New York (31), New Jersey (21), Florida (11) and Massachusetts (11). Zillow added the markets with the most-restrictive building regulations tend to have more cities with $1 million starter homes – and they are also markets with lower homeownership rates.
“Homebuyers are battling affordability and availability today, so much so that $1 million is the norm for a starter home in hundreds of cities,” said Orphe Divounguy, a senior economist at Zillow. “However, it’s looking more and more like there will be some good news ahead for first-time buyers. More homes are for sale, price cuts are on the rise, and buyers have a few more days to weigh their options as homes sit on the market.”
Separately, Redfin (NASDAQ:RDFN) reported the typical luxury home sold for a record $1.18 million in the second quarter, up 8.8% from one year earlier, the biggest increase in nearly two years. In comparison, non-luxury home prices grew at less than half that pace, rising 3.8% to a record high median of $342,500.
The number of luxury homes sold in the second quarter was virtually unchanged from a year earlier, ticking up by 0.2%, marking the third consecutive quarter of sales growth. Non-luxury home sales fell 3.4% to the lowest second-quarter number in a decade.
“The luxury market has withstood the havoc wreaked by high mortgage rates this year, thanks to an abundance of all-cash buyers,” said Redfin Senior Economist Sheharyar Bokhari. “Now that sales are stabilizing and more homes are being listed for sale, it’s unlikely that luxury prices will continue to grow at quite as high a rate.”
Photo: Solvod / iStock
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