A $1 million starter home is now the norm in more than 200 US cities

[Yo_Mama_Been_Loggin]

CNN
—
The number of US cities where first-time homebuyers are faced with at least a $1 million price tag on the average entry-level home has nearly tripled in the past five years, according to new research.

A Thursday report from Zillow indicates that a typical starter home is now worth $1 million or more in 237 cities, up from 84 cities in 2019, underscoring America’s ongoing home affordability crisis.

“Affordability has been strained across the board,” Orphe Divounguy, a senior economist at Zillow, said. “We see the largest number of million-dollar starter homes in expensive coastal markets. We see them in markets with very low homeownership rates and we see them in markets with more building regulations.”

Zillow defines a “starter home” as being among those in the lowest third of home values in a given region. California, New York and New Jersey contain the highest number of cities with entry-level homes that carry an average million-dollar price tag, but half of all US states have at least one such city, the report said.

https://www.cnn.com/2024/07/26/business/more-starter-homes-cost-one-million-dollars/index.html

[SWBTATTReg]

1. Wow. Just wow. I guess I knew that this moment was coming when I kept reading about the constantly

increasing costs of housing across the Country.

And people tend to move where there are jobs there, so the higher density cities (w/ the most housing, the most schools, the most jobs, etc.) will get the lion's share of the migration inwards towards these cities.

[appalachiablue]

2. Thanks, I saw this but forgot to post. Truly a new era..

[ImNotGod]

3. Housing prices in general have tripled in the last 5 years in my state, imagine its that way all over. nt

[valleyrogue]

4. That isn't even counting the taxes and maintenance for these money pits.

No, thanks. I will continue to be a renter until I die. It is way cheaper because of the maintenance costs. Few people "own" a house outright anyway.

Houses should NEVER be seen as "investments" but as places to live, for shelter. The "investment" con is what has gotten this country into this housing mess. The prices have been out of whack since the mid-1970s.

[Voltaire2]

5. Rental prices in the same areas have also undergone a similar massive increase.

[SWBTATTReg]

6. And I think you're right. Somewhere along the road, someone thought "Hey, flip these homes and make some

money, yada yada yada!".

Thus, the great chase was on, the desire to constantly buy houses, fix them up, sell them, repeat, repeat, repeat.

Problem is, eventually you are going to run out of buyers (always a lot of sellers) to keep the cycle going. Especially now when the cycle is starting to break in some areas, such as Florida where home prices have been tumbling (and there are other places too). Do you want to be one of those people who buys into the last stages of a constantly increasing pricing war on homes? No, for you'll get stuck before you know it with a higher mortgage than the house is currently worth, and then it'll take years and years for it to come back, price-wise. I know for it happened to me.

I didn't get caught w/ anything major, but I did want to move elsewhere, and then wham, I was shut out when prices in 2008 went down on housing. It took years for them to recover. But on one side of the fence, I did snag a foreclosed home, decent price, nice size just a mile from my old home so in a way, I did AOK.

[Zoomie1986]

10. Apartments are even more expensive than houses

The lowest unsubsidized rent for a 2BDR apartment is $1600 where I live. My house payment for a 3BDR is $1200. Over 20 years, I could pay for a new roof and any and all minor repairs and even appliance updates with that $400 per month differential.

[The Revolution]

20. Disagree

My mortgage payment for a nice house in a good location (which includes taxes and insurance) is WAY cheaper than I would have to pay for a run down property in a worse area.

When you pay rent, that money just evaporates away from you. But I can sell my house and at least get back some or most of what I put in to it, even if we consider mortgage interests plus maintenance. Especially since the value of my home keeps going up

I would be ok with perhaps limiting the number of homes someone can own, to prevent real estate speculation though.

[brush]

27. Also you get back mortage interest plus expenses in tax returns yearly.

[Voltaire2]

38. You cannot deduct expenses for personal property.

And you get a fraction of your mortgage interest back. It’s a deduction not a credit.
Also not all of your mortgage interest may be deductible, depending on the size of the loan and other factors.

(The mortgage deduction rules are amazingly complicated.)

[brush]

41. I don't know about but my mortgage interest substantially increases my tax return.

Also on a rental property I get that and expenses that increase my return.

A good accountant helps.

[valleyrogue]

7. Renters need to be helped FIRST.

They are in much greater need of a place to live. Biden's proposals are a start in the right direction. It is a recognition of the real issue, affordable housing, and not whether you are rich enough to buy a piece of land.

For too long, renters have been ignored in favor of "homeownership" with all its pitfalls. Many of us have been single all our lives, do not have the buffer of a second income, but we must have shelter. The need is greatest in old age, especially for women alone. We never had the wherewithal to get into the "homeownership" trap in the first place, yet we have had politicians constantly yammer about the "joys" and "pride" and "stability" of "homeownership" (I put the word in quotes because the banks and the mortgage companies are the real owners in most cases). That is the wrong approach to the issue.

[Vinca]

8. Funny, I was just browsing real estate listings in my area and a new listing caught my eye.

It was the very first house my husband and I bought back about 1975. We got it for $25,000. It's now on the market for $385,000. To be fair, a whole lot of work has been done to it, but it's still in a lousy location sitting close to the road.

[PeaceWave]

9. Consider yourself lucky. Nothing in the Bay Area is going for less than $1.25 million.

[MineralMan]

11. Not so unusual, really.

I bought a house in California, in a coastal community, for just $20K in 1974. I sold it in 2004 for $ 337K. Not an unusual thing over 30 years in a desirable place to live. I recently looked up that house's estimated value on Zillow. About $600K.

I live in the Twin Cities metro area now. In 2021, we sold the home we owned there and bought a similar-sized townhome in a desirable suburb. We paid $240K for it, and sold our previous home for around $220K.

In that same suburb, the same two houses, in 2024, are worth between $300-350K. There are plenty of homes in suburban communities in the Twin Cities area for under $400K.

While it's true that you can find cities where the cheapest home is around $1M, but less expensive homes in surrounding areas can be had for half that amount. It you go farther from the densest population areas, home prices go down even more.

There's a lot of exaggeration going on out there. Don't be deceived by it.

[PeaceWave]

12. How is it "exaggeration?" Labor and materials costs have gone up.

[MineralMan]

13. The exaggeration is in limiting such statements

to the most expensive real estate markets in the country. Not everyone needs to or does live in those places. We often want to live in them, though. So, homes in those desirable places cost more, quite naturally.

Often, too, people are only talking about the price of new, or very recently-built homes. They are not the only ones on the market in any location.

There are many places in this country, in almost every state, where you can buy an existing, 2-bedroom, 2-bath single family home for around $200K or less. That is a starter home, by definition. If you can do DIY stuff, you can get a livable one that needs some love for less than that.

Now, let's take Minnesota, the state I live in. You'll find it hard to find that $200K home in the immediate metro area. But, you don't have to go far to find homes around that price. If you don't care about the neighborhood, you can find them even in Minneapolis and St. Paul, if you're willing to do some work on your new place.

Bottom line is that homes in places that are thriving economically are expensive these days. Those, however, are not the only pleasant places there to live and work. Not by any means.

In the end, the more desirable the place, and the newer the home, all other things being equal, the more you're going to have to pay. There's no getting past that fact. So, widen your search if you're set on buying a home on your current income. They're out there, but maybe not where you'd most like to live. Choices. You have to make choices. That has always been the case, one way or another.

Here: Go look at some of these places. Simple Google search.

https://www.gobankingrates.com/investing/real-estate/cities-where-you-can-find-house-for-less-than-200k/

[PeaceWave]

14. Out of curiosity, I just looked up the cheapest detached house in Palo Alto...$1.87 million.

https://www.realtor.com/realestateandhomes-detail/400-Webster-St_Palo-Alto_CA_94301_M23102-77668?from=srp-list-card

976 square feet and it's $625K less than the next cheapest house for sale in that city - which means it'll actually go for far more than asking. Good Lord.

[MineralMan]

15. You're not paying attention.

No, you cannot buy a house anywhere near there for $200K. I didn't say you could. See my link.

If you want to live in urban or suburban California, you ain't gonna find such a thing. There are many places in this country where you can, though.

Choices.

[PeaceWave]

17. I'm paying attention. I just don't want to live anywhere other than California.

I've lived in other states. Nothing compares.

[MineralMan]

18. OK. I dont mind.

Hope you have a very good job. Like I said: choices.

[Voltaire2]

39. The cited article was specifically about the increase

in the number of cities with 1M+ average price for ‘starter homes’. It was clear that there are still lots of cities and towns and villages with much lower average ‘starter home’ prices.

If the article is accurate then there are fewer cities that are affordable places to buy a first house.

If the article is accurate it is reporting a significant change in housing affordability.

We all know intuitively that there has been a significant adverse change in housing affordability. This article provides evidence pointing at the reality of that, confirming our intuitions.

[MineralMan]

43. That's true, and people who read the article will know that.

However, the general feeling out there is that it's impossible to afford to buy a house now. That's true in some places, certainly, but most of those places have priced the average person out of the market for a very long time.

The danger, I think, is that people are being convinced that it is hopeless to think about owning a home. That is simply not the case. Still, many people will read stories like this, or the headlines, and give up on their dreams of living in a house they own. That has a serious negative effect on the market in general and on people's thinking about economics.

So, I wrote a reply to point that out. I will probably continue to do that here, whenever a news story posted here does not reflect the general truth.

If you cannot afford to buy a home in the place you are now living, expand your search. People have been doing that for a very long time, and establishing themselves in places other than the place they grew up. I did that. Others I know did that. We could not afford homes in the places we lived, so we moved to places where we could afford a home.

That's how you do it. It works today as it has worked in the past. It's a big freaking country, with opportunities people can take advantage of. I'm about telling people that. Others are about frightening people. I choose a different path.

[kimbutgar]

16. We brought our home in 1993 in SF for $260,000

At the time I thought it was so expensive. Now fast forward the house next door to us sold for $ 1,320,000. This house doesn’t have the improvements we have made. We extended our kitchen and have a deck and a room in our basement with a bathroom.

But SF is so expensive I’m lucky we brought out house when the real estate market took a downturn.

[MineralMan]

19. But you have that house.

You can keep it. When you decide to, you can sell it and get its value. But you don't have to sell it. You can just enjoy it and your good fortune.

[kimbutgar]

28. I also inherited my parents home they brought in 1955 for $12,000

That’s the real estate I’ll sell for my retirement.

[brooklynite]

21. Want to know why? Because people want to live there...

[Yo_Mama_Been_Loggin]

24. Yep

Supply and demand.

[Johnny2X2X]

22. And yet, home ownership rates are largely static

People still find ways to afford to own.

One of the best parts of owning is you get a little equity and you can sell your home and afford another with 20% down.

[senseandsensibility]

23. I clicked on the link

but didn't find a list of the cities. Did I miss it?

[Kaleva]

25. If the average is 1M, then many homes go for less then that

A few very high priced homes going for much more would drive up the average cost

9 $100k homes and one $10M home will give an average of one million

[JT45242]

32. It was bottom third...like median a better measure of average than mean

The method they used eliminated the skew of a few top priced houses.

If the average of bottom third is a million, there should not be many in the very low or very high part of the range.

[Kaleva]

36. I wonder how wide a range the bottom third covers?

[Think. Again.]

26. And as long as fools keep buying them...

...the real estate agents will keep overpricing them.

[brooklynite]

30. Why are they fools?

Why do you assume the houses are overpriced?

[True Dough]

29. I think very few are hoping for it

but a recession the likes of 2008-09 could cause a nationwide reset in housing prices. The damage done to practically everything and everyone is catastrophic in such instances, but the cyclical nature of the economy means it will happen again someday. It could temporarily trim housing prices by 30-50% if things are bad enough.

[brush]

31. A starter home is typically 2-3 bdrms, 2 baths, small yard, garage.

Does the report mention those things and square footage?

[padfun]

33. In Sacramento, my 4 Bed 3.1 Bath goes for 500K

Its in South Sac which is slightly lower middle-class neighborhoods.
But there are plenty of houses around here that are going for 375K

[Yo_Mama_Been_Loggin]

37. My slightly less than 1000 sq ft, 3 bdr, 1 bath, single car garage house is appraised at 500k.

I live north of Seattle in unincorporated Snohomish County.

I paid $69,000 for it in 1988. It's paid off but I still have to set aside $500 a month for taxes and insurance.

[MenloParque]

34. Menlo Park, Ca cheapest house on Zillow is $1.6. 2 bed/1bath built in 1937!! Crazy!!

[Clouds Passing]

35. Vulture Captalists trying to create another crash.

[OAITW r.2.0]

40. 20 x 40 log home built in 2000. 1600 total sf of living space (3 floors).

On 50acres. Tried to sell in 2015 for $260K....no dice. Just as well. Reroof, added solar with battery back-up and repainted everything. Will be a helluva of an AirBnB when I exit this mortal coil, for my kids. I got the mortgage covered. Central Maine....where life will be, eventually.

[RussBLib]

42. 1983 we paid $74,900 for a starter home

In Houston. 1200 sq ft. Plus a 21% interest rate!! And we were glad to pay it. When rates dropped, we.kept refinancing till we had it down to 12%.

Rates are better now, but the prices! Sheesh!

https://russblib.blogspot.com/?m=1