Starter Homes Cost $1 Million and Up in These US Cities. Here's How Much You Have to Earn to Afford One
Starter Homes Now Cost $1M+ in Over 230 U.S. Cities
The number of U.S. metro areas where starter homes cost $1 million or more has nearly tripled since 2020 rising from 85 to 233, according to Zillow’s March 2025 housing study. This surge reflects lingering effects of pandemic-era price inflation.
While the national average for a starter home remains around $192,514, Zillow defines these homes as those in the lowest third of property values within each region making the $1M+ price tag a stark indicator of affordability challenges.
- In 2020, just 85 U.S. cities had starter homes priced at $1 million or more. By 2025, that number surged to 233 metro areas.
- Pandemic-era price growth drove up housing costs across the board—and starter homes weren’t spared. Prices remain elevated nationwide.
- While the average U.S. starter home costs $192,514, affordability remains a major challenge for first-time buyers in many regions.
Key Takeaways
How Much Should You Spend on a Starter Home?
Experts recommend following the 30% rule a federal guideline that suggests spending no more than 30% of your gross income on housing costs.
For homeowners with a mortgage, those costs typically include:
- Loan principal
- Interest payments
- Property taxes
- Homeowners insurance
This rule helps ensure you can still afford essentials like food, transportation, utilities, and healthcare. If housing eats up more than 30% of your income, it may strain your ability to cover other critical expenses.
How Much Should You Earn to Afford a $1 Million Home?
Buying a $1 million home with a 6.75% interest rate and 20% down means your estimated monthly costs would be:
- Principal & interest: $5,188.78
- Property taxes: $833.33
- Homeowners insurance: $292.00
- Total monthly payment: $6,314.11
To stay within the 30% income rule, you’d need a monthly income of $21,047.03, or about $252,564.40 annually, to comfortably afford this home.
Mortgage rates change frequently, influenced by market conditions, inflation, and Federal Reserve policy. To make informed decisions, always check the latest rates before applying for a loan.
The Home Affordability Gap: Why the 30% Rule Is Breaking Down
The 30% rule spending no more than 30% of your income on housing is becoming harder to follow. Home prices keep rising, but real wages aren’t keeping pace, even for higher-income households.
In May 2025, the housing cost-to-income ratio hit 34.75%, according to Investopedia’s data. That means many homeowners are overspending on housing, leaving less room for essentials like food, healthcare, transportation, or long-term goals like college savings and retirement.
The Bottom Line
Affordability is a growing challenge for homeowners especially first-time buyers. Pandemic-era price surges and elevated mortgage rates have outpaced wage growth, making it harder to stay within budget.
As a result, many households are spending more on housing, leaving less room for essentials like food, healthcare, and savings goals. The starter home dream is still alive but it’s getting tougher to reach.
