The American Dream of homeownership is becoming a nightmare for many first-time buyers as starter homes now cost over $1 million in 233 U.S. cities.
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This staggering reality illustrates an alarming trend driven by an insatiable demand and scant supply.
Half of U.S states now have at least one city where the entry point for homeownership has crossed the million-dollar mark.
Zillow’s analysis paints a sobering picture: nearly triple the number of cities compared to just five short years ago now see these astronomical starter home prices.
A stunning 233 cities across the nation report these figures, up from 85 five years ago, showing that this isn’t just a coastal anomaly anymore, CNBC reports.
Young buyers, particularly in cities like those in California, New York, and New Jersey, face a tough uphill climb.
According to Zillow data, these states have led the pack in cities where an average starter home breaches the $1 million threshold.
The pandemic-fueled housing boom created a vicious cycle that complicates new home purchases even further.
Factors including increased demand for single-family homes and slowed construction during COVID-19 lockdowns have exacerbated the already significant shortage.
Mortgage rates have also played a pivotal role in straining affordability.
The 30-year fixed mortgage currently sits at an average 6.83%, with rates having ticked up yet remaining below the 7% mark for several consecutive weeks.
Increased costs associated with homeowners’ association fees and insurance premiums further squeeze potential buyers, pushing many young households to delay homeownership.
This delay has serious implications, with the median age of a first-time homebuyer reaching a record high of 38, as their share of home purchases dips to an all-time low of 24%.
“First-time buyers are facing a market where prices that once seemed unimaginable have become reality,” said senior economist at Zillow Kara Ng, reflecting the extent of this challenge in today’s real estate market, cited by Fox4.
Yet, there is a glimmer of hope: new sellers entering the market have caused the total number of cities with $1 million starter homes to slightly decline from 239 cities earlier this year.
In response to these realities, potential homebuyers must recalibrate their expectations and approach buying strategically.
The typical starter home nationwide still values at $192,514, underscoring that not all is lost for those looking beyond major metro areas.
'Starter homes' cost at least $1 million in over 200 U.S. cities, Zillow data finds https://t.co/4LGpCbVuVy
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