Entry-level homes in hundreds of US cities now cost $1 million or more — here's what it means for your clients' qualification math
The entry-level home has hit seven figures in 242 US cities, according to new data from Zillow — and the number has tripled since 2020.
Zillow defines a starter home as a property in the lowest third of home values for a given area. That threshold now sits at $1 million or more across cities in 26 states. Before the pandemic, only nine states had any city with million-dollar entry-level homes.
The national median starter home still costs just under $199,000. But for clients looking in high-cost markets, the gap between what they need and what they can borrow has widened sharply.
What the qualification math looks like
A household needs an annual income of nearly $117,000 to afford the average US home, according to Redfin. At the median price of roughly $418,000, a buyer putting 15 percent down at current rates would need to spend around 40 percent of income on housing. Most lenders and financial advisers recommend keeping that figure below 30 percent.
For a million-dollar starter home, the income requirement rises well beyond that threshold. The 30-year fixed rate has hovered around 6.6 percent in recent months, with forecasters expecting rates to stay in the mid-sixes through the end of 2026.
At that rate, qualifying for a $1 million home typically requires annual household income of at least $200,000, according to financial education site SoFi. That’s well above what most first-time buyers earn.
Where million-dollar starter homes are concentrated
California accounts for the largest share, with 105 cities where entry-level homes carry a seven-figure price tag. New York follows with 41, and New Jersey with 26.
The chart below shows all 26 states with at least one million-dollar starter home city, ranked by city count. All data from Zillow:
Sun Belt markets have seen some relief through new housing supply. The Northeast has not. A shortage of new construction there has kept prices elevated even as demand in some coastal markets has started to moderate.
What brokers can do for buyers in million-dollar markets
Research shows that buyers are adapting their expectations: willing to consider smaller homes, different neighborhoods, or markets outside their first choice.
That shift creates an opening. Brokers can help clients model realistic qualification scenarios and explain which markets still offer a viable path. In doing this, brokers are providing a service no algorithm can replicate.
A TD Bank survey found only 27 percent of first-time buyers spoke with a mortgage lender during the homebuying process. Just 22 percent obtained pre-qualification or pre-approval. Buyers who do engage a broker early are better positioned to understand their options, including down payment assistance programs and alternative paths to ownership.
For more on what affordability pressures mean for your clients, explore mortgage industry market updates and affordability coverage from Mortgage Professional America
