In more than 200 U.S. cities, $1 million alone can get you a starter home

Nationally, the typical first home costs about $200,000. But in a growing number of U.S. cities, that same amount covers just the down payment.

Today, amid a nationwide housing shortage and rising mortgage costs, you’ll need at least $1 million for a starter home in 237 cities, according to a Zillow analysis. That’s a hefty sum for a place to live that the report defines as the bottom third of home values ​​in a given region. The new data marks a significant increase from five years ago, when just 84 U.S. cities had starter homes costing seven figures.

How did we get here?

The pandemic has exacerbated an existing housing shortage in U.S. cities, most pronounced in Boston; Sacramento, Calif.; and Portland, according to Zillow. Despite robust housing construction in 2023, the 1.4 million homes built are not sufficiently closing the gap between available units and the number of people looking for housing in the U.S.

“It’s no surprise that we’re in a bit of a housing affordability crisis in the U.S.,” Zillow senior economist Orphe Divounguy told CBS MoneyWatch. “You saw a couple of decades of underbuilding collide with an increase in housing mobility during the pandemic, which drove up prices and rents.”

Divounguy suggested that relief for home buyers could be on the horizonMore and more houses are coming up for sale and prices are falling.

“There is some light at the end of the tunnel. More new homes are coming onto the market and builders are trying to do the math for homebuyers. As inventory increases, you’ll likely see price growth slow down and more sellers offer price reductions,” Divounguy said.

What these cities have in common

While not representative of the typical starter home price in the U.S., half of all U.S. states have at least one city where a relatively modest home costs $1 million. California has 117 such cities, the most of any state, while New York has 31 and New Jersey has 21. Florida and Massachusetts each have 11, according to Zillow’s analysis.

The New York City metropolitan area has 48 cities with million-dollar starter homes — the most of any metropolitan area. The San Francisco metropolitan area has 44, Los Angeles has 35, San Jose has 15, and Miami and Seattle each have eight.

According to the report, there is one thing that cities with $1 million starter homes have in common: They often have very strict building codes, which can hinder new construction.

In coastal areas such as California and New York, there is a limited supply of land for new homes and there are also natural constraints, such as mountains, lakes and oceans, Divounguy noted.