'Starter Homes' Go For More Than $1M, Pricing Out First-Time Buyers

A new study revealed that the number of cities in the U.S. that offers an entry level home with a price tag of at least $1 million is increasing. In fact, locations with these pricey homes for first-time buyers total more than 200.

Zillow released a report on Thursday indicating that a "starter" home now comes at a price tag of $1 million or more in 237 cities. In 2019, only 84 cities were found to have such home prices.

The numbers denote that there is a crisis in the U.S. in terms of home affordability, CNN reported. As a result of these, young Americans remained to be renters for a lot longer than necessary.

Zillow, a real-estate tech company, noted that a "starter home" is one that could be found in the "lowest third" of home values in a particular region, Bloomberg stated.

The company revealed that the top three states with starter homes that are in the range of $1 million are California, New Jersey and New York. The cities of San Francisco and Los Angeles were likewise included in the list.

Orphe Divounguy, a senior economist at Zillow. stated that the affordability of a home has been strained almost everywhere.

"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," he added.

A Gallup Survey in May showed that about 76% of American stated that it was a bad time to purchase a house. It also added that it was basically a shortage of homes that are being put up for sale, as compared to the demand. Such scenario simply brought up home prices.

The study shows that the prices of starter homes grew much faster than other types of homes. On the other hand, average U.S. homes increased by 49.1 % as compared to the 54.1% growth over the last half a decade.