The affordability crisis in the US housing market has worsened significantly in recent years, with the number of cities where first-time homebuyers face at least a $1 million price tag on the average entry-level home nearly tripling in the past five years. Zillow’s report reveals that 237 cities now have starter homes worth $1 million or more, up from 84 in 2019. This trend is particularly prevalent in expensive coastal markets, areas with low homeownership rates, and regions with stringent building regulations. States like California, New York, and New Jersey have the highest number of cities with million-dollar starter homes, highlighting the widespread nature of the issue.
The combination of skyrocketing home prices, elevated mortgage rates, and limited supply has led to frustration among Americans regarding the housing market. A majority of Americans believe it is a bad time to buy a house, highlighting the challenges faced by prospective homebuyers. The pandemic resulted in a surge in home prices as remote workers sought homes with more space, while the Federal Reserve’s actions on inflation led to an increase in mortgage rates. These factors have created one of the most unaffordable housing markets in a generation, with young Americans remaining renters for longer due to high prices and borrowing costs.
The median age of a first-time homebuyer has increased to 35, reflecting the difficulties faced by younger generations in entering the housing market. The median price of a previously owned home in the US reached $426,900 in June, setting a new record high. Starter home values have outpaced the average home values, growing by 54.1% in the past five years compared to 49.1% for the average US home. This disparity is driven by the high demand for starter homes coupled with limited supply, leading to faster price increases for these properties.
While the overall outlook for first-time homebuyers is challenging, it is still possible to find entry-level homes priced below $1 million in the United States. The nationwide average price for a starter home is $196,611, though cities with restrictive building regulations tend to have higher-priced real estate. However, there are some positive signs in the market, such as an increase in home inventory, which could provide buyers with more negotiating room. In June, there were 1.32 million active listings in the US, representing a 23.4% increase from the previous year and hinting at a potential shift from a seller’s market to a buyer’s market.
Overall, the housing affordability crisis in the US continues to pose challenges for first-time homebuyers, with many facing million-dollar price tags for entry-level homes. Rising home prices, mortgage rates, and limited supply have created a difficult market for prospective buyers, leading to frustration and delays in homeownership for many Americans. While there are signs of improvement, such as an increase in home inventory, the long-term outlook for affordable housing remains uncertain, requiring continued efforts to address the underlying issues driving the crisis.
