The rise of the million-dollar starter home
Despite recent gains in affordability, a new Zillow analysis found that a record number of U.S. cities now have typical starter homes priced at or above $1M.
Key points:
- It takes at least $1 million to buy a starter home in 242 U.S. cities today, a new Zillow analysis found.
- The curbing of new construction following the 2008 financial crisis paired with a surge in pandemic-era demand caused home prices to spike in several cities.
- While many Northeastern markets were found to have starter homes priced at or above $1 million, Midwestern and Southern markets scored comparatively higher on affordability and new home construction efforts, a Realtor.com report found.
Since the Covid-19 pandemic, homeownership costs have skyrocketed.
For many, the ability to afford a $1 million home is a pipe dream — or, at best, an aspirational goal. But the reality today is that the cost of a starter home in many markets begins at $1 million.
Factors creating $1M starter home cities
Since February 2020, the number of cities where a typical starter home — defined as one in the lowest third of home values in any given region — costs $1 million or more has tripled, according to a new Zillow analysis.
The number has grown from 80 cities in early 2020 to a record 242, up from 226 last year. In contrast, the typical starter home nationally is worth just $198,649, Zillow found.
The explosion in million-dollar starter home cities came in response to a nationwide housing shortage that has been growing since the 2008 financial crisis as home builders started pulling back. By the time historically low mortgage rates arrived during the pandemic, demand surged and home prices spiked, with overall inventory insufficient to meet demand.
Even with the uptick of million-dollar starter home cities, many markets across the country have started to normalize over the past year, giving buyers some relief. "The pandemic reset the cost of buying a home, spreading million-dollar starter homes from a handful of coastal states to more than two dozen states across the country," Zillow Senior Economist Kara Ng said in the report.
But buyers "are generally in better shape than in recent years" amid growing inventory, slowing home price growth and a shrinking rent-versus-buy gap, Ng added.
Pricey starter homes in the Northeast, California
Markets in which starter homes cost at least $1 million are more prevalent in the Northeast where "inventory deficits run deep," Zillow's analysis noted.
New York and New Jersey have the fastest-growing number of million-dollar starter home cities, with 41 in New York (up from 12 pre-pandemic) and 26 in New Jersey (up from 1). The New York City metro area, which encompasses parts of New Jersey and Pennsylvania, is the metro with the most million-dollar starter home cities in the U.S., with 63 total.
Across the U.S., 26 states now have at least one city with million-dollar starter homes, compared to just nine pre-pandemic. California tops the list with 105.
States leading in affordability, new construction
At the opposite end of the spectrum, Midwestern and Southern states are leading in affordability and new home construction, according to the Realtor.com's 2026 State Report Cards.
The June 15 report graded for affordability — measured by homeownership accessibility for state residents based on median household income and the share of that income required to afford a local median-priced home — and home building activity, which was measured based on the state's permit-to-population ratio and the premium placed on buying new versus existing homes.
Indiana ranked No. 1, surpassing South Carolina, which ranked first last year and fell to third in 2026. Iowa placed second, Texas placed fourth and North Carolina rounded out the top five. Of the 13 states that received the highest grades, 12 were located in the Midwest or in the South. The only East Coast state that placed in the top 10 was Delaware.
A closer look at the top state: A median-priced home in Indiana sells for $295,810 and requires about 28% of the median household income, comfortably below the 30% marker of affordability, according to Realtor.com's report.
The Hoosier State built more than 20,000 single-family units in 2025 — well above the 12,000 units built in 2015 — and has a permit-to-population ratio of 1.02. However, Indiana's new home construction efforts are just keeping up with demand created by the young professionals who have moved into the area from nearby pricier markets, Indiana Builders Association CEO Rick Wajda said in the report.
"That's the challenge putting upward pressure on a lot of our communities across the state on pricing, because there's just not enough units in the ground for consumers to look at," Wajda said. Recent state legislation rolling back restrictive local regulations has helped, he added, and Indiana's builders are now looking to increase workforce and entry-level housing.