A $1 million starter home? It’s becoming the norm in these cities

In more than 200 U.S. cities, the typical starter home comes with a price tag of $1 million or more, according to a new analysis, underscoring the affordability challenge many first-time homebuyers face.

The data, compiled by real estate company Zillow, found that there were 237 cities where the typical starter home was worth $1 million or more. Five years ago, there were only 84 such cities.

The typical "starter home" was defined for the analysis as being among those in the lowest third of home values in a given region but worth at least $1 million. 

"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." 

Half of cities with million-dollar starter homes are in California

According to the data, exactly half of all states had at least one city with a typical starter home worth $1 million or more.

There were 117 cities with starter homes of at least $1 million in California – well ahead of New York (31) and New Jersey (21) – which had the next most. Florida and Massachusetts rounded out the top five with 11 each. 

Among metropolitan areas, the New York City metro, which included parts of New Jersey and Pennsylvania, had the most cities with million-dollar starter homes at 48. The San Francisco metro had the next highest count at 44, then Los Angeles (35), San Jose (15), and Miami and Seattle, each with eight. 

US cities with million-dollar starter homes

The challenge to find affordable housing

The news comes amid a housing shortage, which has helped drive the cost of homes up over the last few years. First-time buyers especially are feeling the impact. 

Nationwide, the typical starter home is worth $196,611, which is considered comfortably affordable for a median-income household, Zillow noted. However, starter home values have grown 54.1% over the past five years. 

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That has delayed the first home purchase for many. According to Zillow, the median age of a first-time home buyer was 35 last year, a year older than in 2019.

This story was reported from Los Angeles.