Rising Housing Costs in the United States
A typical starter home in the United States sells for about $200,000, but in many cities, that’s just a down payment. With housing in short supply and mortgage rates at their tightest levels in years, you’ll need at least $1 million to buy a starter home in 237 cities, according to Zillow’s analysis. This represents a significant increase from five years ago when only 84 U.S. cities had new homes priced in seven figures.
The Impact of the Pandemic on Housing
The pandemic has exacerbated existing housing shortages in cities across the U.S., most notably in Boston, Portland, Ore., and Sacramento, Calif. Despite strong home construction in 2023, the 1.4 million homes built won’t be enough to close the gap between available units and the number of homebuyers in the U.S. Zillow senior economist Orphe Divounguy stated, “You’re seeing decades of underconstruction colliding with the surge in residential mobility during the pandemic, pushing up prices and rents.”
Factors Contributing to Million-Dollar Home Prices
Cities with $1 million new homes tend to have very strict building codes, which can hinder new construction. In coastal markets such as California and New York, the supply of land available for new homes is limited and constrained by natural conditions such as mountains, lakes, and oceans.
Overall, the trend towards million-dollar starter homes reflects the broader housing affordability crisis facing the country, with prices continuing to rise and inventory remaining tight. However, there is hope on the horizon as more new construction homes come on the market and builders work to make housing more accessible to buyers.
As the market evolves, it will be crucial for policymakers, developers, and communities to work together to address these challenges and ensure that affordable housing options remain available for all Americans.
