The variety of U.S. metro areas the place starter properties price a minimum of $1 million has practically tripled since 2020, from 85 to 233. Zillow’s March 2025 examine on the housing market revealed this gorgeous soar in the price of entry-level properties. Whereas the typical nationwide worth for a starter house is $192,514, the rising variety of $1 million+ starter properties is a lingering results of pandemic-era worth development.
For its functions, Zillow outlined starter homes as properties amongst these within the lowest third of house values in a given area.
Key Takeaways
- In 2020, solely 85 U.S. cities had starter properties valued at $1 million or extra. In 2025, 233 cities have starter properties which are a minimum of $1 million.
- The price of starter properties jumped together with all housing prices in the course of the pandemic, and costs stay excessive.
- The typical price of a starter house within the U.S. is $192,514, however affordability stays a problem all through the nation.
How A lot Ought to You Spend on a Starter House?
Monetary consultants have lengthy really helpful following the 30% rule in the case of figuring out how a lot to pay for housing. This rule of thumb was established by the federal authorities, and it suggests you need to spend not more than 30% of your gross revenue on housing prices.
Understand that housing prices with a mortgage embody:
- Mortgage principal
- Curiosity
- Property taxes
- Owners insurance coverage
The advice was created to make sure householders may afford different residing bills like meals, transportation, utilities, healthcare, and different prices related to operating a family. If greater than 30% of your revenue goes towards placing a roof over your head, it’s possible you’ll end up strapped to pay for different essential requirements.
How A lot Ought to You Earn to Purchase a $1 Million House?
If you are going to buy a $1 million house at an rate of interest of 6.75% and put 20% down, your month-to-month funds could be:
Your complete month-to-month cost could be $6,314.11. So, in line with the rule, this should not be greater than 30% of your gross revenue. You would wish a month-to-month revenue of $21,047.03 (or an annual revenue of $252,564.40) to comfortably afford a $1 million house.
The House Affordability Hole
You might have noticed an issue with the 30% rule: Housing prices proceed to rise whereas actual wages aren’t maintaining. This makes it more durable for householders (even these with larger incomes or the perfect intentions) to comply with the rule.
Owners are more and more stretched, spending over 30% of their revenue on housing. In Might 2025, the housing cost-to-income ratio was 34.75%, primarily based on Investopedia’s housing affordability information. This leaves households with much less revenue for necessities or monetary objectives like faculty or retirement.
Investopedia tracks house costs, mortgage charges, revenue, and extra to generate a housing cost-to-income ratio. The info reveals a major hole between median month-to-month incomes and the revenue required to comply with the 30% rule:
The Backside Line
Owners, particularly these searching for starter properties, face an affordability problem. The pandemic-era improve in housing costs, coupled with larger mortgage charges, makes it arduous for wages to maintain up. This pushes householders to spend extra on housing on the expense of different requirements or monetary objectives.
In the event you’re a first-time homebuyer, it is essential to analysis housing prices and mortgage charges to make sure you get the perfect deal. Requesting mortgage quotes from a number of lenders may find yourself saving you a substantial quantity in your mortgage funds.
