The staggering price of “starter homes”

Million-dollar starter homes

We know that affordability is an issue for many first-time buyers, and we have a story today that highlights that issue.

Zillow has released a list of cities where the typical “starter home” is a million dollars or more. That’s right–these are cities where first-time buyers will have to spend one million or more to get into their first home.

As you’ll see below, in just the past five years, the number of these cities has nearly tripled.

Below, we give our take on these eye-popping numbers, and what it means for the market and for our business.

- James and David

New home sales make big jump

In March, new single-family home sales climbed 7.4% month-over-month and 6% YOY to a seasonally adjusted annual rate of 724,000, according to Realtor.com. Lower price points continue to drive buyer demand, as more affordable new homes dominate the market. Here are the key takeaways:

• The median sales price fell to $403,600, down from $411,500 in February and $436,400 a year ago.

• The share of homes sold for less than $300,000 rose last month, along with the shares of homes between $300,000 and $399,999.

• The South accounted for about two-thirds of all new-home sales and was the only region to post an annual sales increase (+22.3% YOY).

• The Northeast recorded the steepest declines, with sales down 22.2% month-over-month and 33.3% YOY.

• The Midwest saw modest monthly growth (+3%), but both the Midwest (-15.9%) and the West (-12.2%) posted year-over-year sales losses.

Our take

The jump in home sales might seem surprising given the hurdles facing buyers, but it’s not as surprising as it looks. The new tariffs only took effect in April, and that’s when consumer sentiment around big-ticket purchases began to plummet. What’s more interesting is the divergence between new and existing-home markets. In the existing-home space, luxury properties have been outperforming more affordable inventory, and many of the slowest markets are concentrated in the South. In contrast, the new-home market is being driven by lower-priced inventory, with the South leading the way. Builders still have plenty of supply for budget-conscious buyers, at least for now. We’ll see if this pattern holds once April numbers come in.

Spike in cities with million-dollar starter homes

The typical price of a starter home topped $1 million in 233 U.S. cities last month, according to a new report from Zillow. Just five years ago, only 85 cities had starter homes costing at least $1 million. Right now, in half of all U.S. states, at least one city now has a typical starter home priced at $1 million or higher.

To define “starter home prices”, Zillow looked at estimated home values in the lower tier of each market, specifically between the 5th and 35th percentiles. Here’s what else Zillow found:

• The median sales price of a U.S. home has jumped 42.5% over the past five years, from $302,487 in March 2020 to $431,078 in March 2025.

• California leads with 113 cities where the typical starter home costs $1 million or more, followed by New York (32 cities) and New Jersey (20 cities).

• Here are the top 5 US cities with the most expensive starter homes in March:

  • Jupiter Island, FL: $5.9M

  • Los Altos Hills, CA: $4.8M

  • Atherton, CA: $4.5M

  • Golden Beach, Florida: $4.3M

  • Hillsborough, CA: $3.9M

Our take

The surge in million-dollar "starter homes" highlights just how sharply affordability has shifted over the past five years. While rising prices have benefited existing homeowners, they’ve also raised the barrier to entry for first-time buyers in many parts of the country, especially in coastal markets like California, New York, and Florida. First-time buyers are older today and account for a smaller share of total home purchases than they once did.  With home values up more than 40% nationally since 2020, navigating the starter home market now requires more flexibility, creative financing solutions, and, in many cases, a willingness to consider emerging or secondary markets.

Where sellers and buyers have the most power

According to Zillow, the U.S. housing market posted a 55 on its Zillow Market Heat Index for March. The Heat Index measures the competitiveness of housing markets nationwide, using indicators like home price changes, inventory levels, and days on market. Higher scores indicate hotter markets favoring sellers, while lower scores point to cooler markets favoring buyers. For reference, here’s how Zillow breaks down its scores:

• Score of 70 or above = strong seller's market

• Score from 55 to 69 = seller's market

• Score from 44 to 55 = neutral market

• Score from 28 to 44 = buyers' market

• Score of 27 or below = strong buyers' market

Of the 250 largest markets Zillow tracks, here are the 10 where sellers and buyers currently have the most power.

Our take

The March reading confirms what many agents are seeing on the ground: the market is highly fragmented. Some Northeast and Midwest markets, like Rochester and Buffalo, remain extremely competitive for buyers, while parts of the South, especially Florida, are shifting more toward buyers' favor. Overall, with a national score of 55, the U.S. market is straddling neutral territory. Agents should be prepared for very different dynamics depending on the metro and adjust pricing, marketing, and negotiation strategies accordingly.

Schematics

The news that just missed the cut

• Zillow gains more support for new listing policy

• Florida’s most expensive home just sold

• Homeownership rates fall this year

• FHA walks back restrictions on foreclosed property sales

• Blueprint to use for million-dollar listings

Foundation Plans

Advice from James and David to win the day

Pricing is one of the most critical skills agents must master. In today’s market, sellers must price their properties correctly. Otherwise, they risk having their listings go stale on the market for months. 

Pricing requires case-by-case analysis. Trends can vary widely even within the same community. Over the next three editions, we'll walk through the three essential steps to pricing a listing properly: 1. Understanding your property, 2. Gathering relevant comps and 3. Devising a smart pricing strategy. 

Today, we’re focusing on the first step.

1. Understand Your Listing

The first step is to gather detailed information about your property. Establish broad search parameters, then narrow them based on the number of comparable homes you find. For example, if you're pricing a 4-bedroom, 2.5-bath, 2800-square-foot home with a two-car garage that’s 10 years old, you’ll want to find similar properties for comparison.

Key factors to consider:

• School districts: If schools are important in your area, make sure to stay within the same district. If you're struggling to find comps, you might expand into nearby districts with similar school rankings.

• Geography: For rural or semi-rural areas, keep your search within the county or a 20-mile radius. For unique properties, such as farms or mixed-use homes, seek help from brokers or appraisers.

• Home age: Search for homes within a 10-year age range of your subject property. If that doesn’t yield enough results, expand your search.

• Condition: Evaluate the property's condition, including curb appeal, appliance age, roof, and any other visible wear. Ask the seller if the home has undergone recent renovations, as this can impact pricing.

• Size: Start with flexible size parameters, such as homes between 1900 to 3100 square feet for a 2500-square-foot house, then narrow the range if too many results appear.

• Cost per square foot: While useful, cost per square foot should never be your only metric. Smaller homes generally have a higher cost per square foot, and new construction will vary from resale homes.

The style of the home also matters. If your property is a modern home in an area filled with colonials, it may be harder to sell. However, an East Coast Cape Cod in Cape Cod itself might attract multiple offers at a premium price. Adjust your expectations based on the property’s uniqueness.

Really understanding your property is only the beginning. It flows into the other two steps, which we will cover in the upcoming editions. In the meantime, start here and here to learn how to price your listing effectively.

Just in Case

Keep the latest industry data in your back pocket with today’s mortgage rates:

“Your time is limited, so don’t waste it living someone else’s life.” – Steve Jobs

Life’s too short and time is too precious to play by someone else’s script, friends. Block out the noise, live with integrity, and go all in on the life you want. You’ve got one shot — make it count.

- James and David