A new analysis by Realtor.com reveals that affordability for starter homes in the U.S. is slowly recovering, though the market remains significantly more challenging than before the COVID-19 pandemic [1]. The typical starter home price has increased from $256,000 in 2019 to $344,000, and the share of affordable listings under $350,000 has dropped from 55% to 37.6% during the same period [1]. According to Realtor.com senior economist Hannah Jones, the income required to qualify for a starter home mortgage has surged from $43,000 to $78,000, while monthly payments have risen by more than 80% since 2019, outpacing income growth [1].
These affordability pressures have led to a shift in the profile of first-time buyers, with the average age rising to 40 years old and the share of first-time buyers recovering from 30% a year ago to 35% in May [1]. Jones notes that higher-income households now dominate the market, as lower-income buyers are increasingly priced out [1]. Many households are pooling resources, living with parents longer, or relocating to more affordable regions, resulting in today's starter home buyers resembling move-up buyers from a decade ago [1].
Inventory has shown some improvement, with 220,000 more starter homes for sale compared to 2022 and prices down 4.2% from that period, largely due to new construction, especially in the South [1]. Builders in Texas, Florida, and the Carolinas have contributed significantly to this recovery by increasing supply as demand moderated [1]. However, 'lock-in' effects persist nationally, with nearly 70% of outstanding mortgages at 5% or below, discouraging existing homeowners from moving and limiting broader inventory growth [1].
Regionally, the South stands out as the 'clearest bright spot,' with starter home prices down 3.5% from their peak and 170,000 more affordable homes available, driven by new construction activity [1]. The national outlook is slowly improving, but significant regional disparities remain [1].
CONCLUSION
Starter home affordability is gradually improving, particularly in the Southern U.S., thanks to increased new construction and moderating demand. However, affordability remains well below pre-pandemic levels, and lower-income buyers continue to face significant barriers. The market is showing signs of recovery, but regional differences and persistent inventory constraints continue to shape the landscape.