7mo ago

A $1 million starter home is now the norm in more than 200 US cities

www.cnn.com A $1 million starter home is now the norm in more than 200 US cities | CNN Business

The number of US cities where first-time homebuyers are faced with at least a $1 million price tag on the average entry-level home has nearly tripled in the past five years, according to new research.

A Thursday report from Zillow indicates that a typical starter home is now worth $1 million or more in 237 cities, up from 84 cities in 2019, underscoring America’s ongoing home affordability crisis.

“Affordability has been strained across the board,” Orphe Divounguy, a senior economist at Zillow, said. “We see the largest number of million-dollar starter homes in expensive coastal markets. We see them in markets with very low homeownership rates and we see them in markets with more building regulations.”

110 comments

Precovid houses I could afford with a weeks pay. Now it's the whole pay check. Ridiculous. Wanna fix the birth rate fix this. I'm tired of being born at the wrong time for everything. It's always some bs.
- Precovid houses I could afford with a weeks pay. Now it’s the whole pay check.
  You mean rent, right? Right?
  
  No, it was ultra cheap in my region. Cheaper than rent. I begged my partner to by a house since it was HALF our rent for a decent 2014 built house with acres of land. But nooo they want to rent for life. Now that I finally convinced them otherwise I can't afford it. It causes alot of resentment for me.

A side effect of sky rocketing housing prices is the annual tax liability also goes up, so people on a low or fixed income may no longer be able to afford the home they've lived in for decades. It's the same problem that happens when neighborhoods are gentrified.
- Some localities limit the increase in taxable value to a fixed percentage, which can combat that. The taxable value of my home is something like 25% of the actual value.
  
  Which has the downside that it locks people into their current home because moving would mean losing their favorable rates.
  Rising prices are bad for everyone.
  
  What happens when you sell it?
- Obviously it sucks if they have to move, but it's hard to feel too sorry for people that have become incredibly wealthy...
  Also, municipal expenses don't scale directly with property values... So while local taxes are often based on home values, they are adjusted to the level that meets the municipal budget. If everyone's house doubles in value one year, taxes stay the same, not double...
- That’s just how life is in a society. Don’t fall for the stupid Prop 13 trap that ruined so much in California.
  Edit: how TF does this get downvoted to heck but my reply one down is upvoted even higher even though they say the same thing. Are you all just bandwagoners here? I thought I got away from redditors but I’m having second thoughts now.
  
  As long as people are selling and buying houses what's the problem?

Most homes are simply out of reach for most Americans at this point, particularly if you live in a city. Even renting one is extremely expensive unless you move into a smaller town.
- In the (rust belt here) midwest it's almost reversed, homes in the rural areas cost much more than they do in the city. But our cities are car centric wastelands, where whole city blocks have been turned into parking lots.
  
  Not to mention, smaller towns have much lower investment capacity in revitalizing century old infrastructure. There's not enough appeal or added convenience for most to live in the middle of a 20-60k population center opposed to the privacy and space offered by smaller neighboring municipalities or outskirts. Footing the bill for renovation and raising rent to compensate, because almighty profit, eliminates their only clients. Housing's fucked here all the way around.
  P.s. any one got silly little 20k to pull me out of debt and give me a down payment on a starter home? 🙃

20 years ago, my mother bought a house for just under 50k. Houses in my hometown, of the same rough location and type, now go for 4x that.
Insane that housing prices have outpaced inflation by such a ludicrous degree. It's almost like the system is broken, the ultra-rich and corporations have found all the good tricks and loopholes and are exploiting them to the detriment of both ordinary citizens and the nation as a whole.
- I cannot recommend the book "Escaping the Housing Trap" highly enough. It talks a lot about the funding and financial products around housing and some of the fundamental flaws in the system. It's quite easy to blame institutional owners and they're certainly partly at fault, but it's vastly more complex than that. It's a really great scary read that genuinely had my mouth hanging open at times.
  
  Tldr?
- 20 years is enough to double twice which would be 4x the price. That is how appreciating assets work.
  
  Housing shouldn't be an (in real-terms) appreciating asset. In the long run that just leads to feudalism.
  Imagine if everything keeps appreciating for 200 years.... now only cyborg Elon musk can afford to buy a house.
  
  What about income..?

where did all this extra money come from to pay for these homes at these rates?
- Large-scale investors buying up housing stock to rent out.
  
  and where are they getting this extra money?
  edit: c'mon people the bush and trump tax cuts were trillion dollar gifts to the worst people on earth and their heirs. These people need to be taxed.
  
  COVID and free money.
- Working poor people. Money always comes from working poor people.

California?
(checks notes)
More than 100 of the 200 are in California. :) Next closest is New York at 31.
Seems like a mostly California problem.
- It’s not just a California problem. It’s a coastal city problem.
  It’s not really shocking. The coast is valuable and limited. Living in an expensive coastal town isn’t really “starter home” material.
  
  You wouldn't say that if you saw what they're selling for a million dollars. House built in the 1940’s with no maintenance except paying off the inspector not to condemn it? Yup that's a million dollars. Falling into the ocean because of coastal erosion? It has an extra bathroom, it's 1.5M.
  I joke obviously but I'm not that far off either.
  
  I mean, the coasts aren't really that densely populated. If we build nicer cities there would be plenty of potential space.
  Instead we build shitty suburbs and sprawl, which will always lead to awful, expensive cities
- this reminds me of the then they came for me thing. I remember when you could pick up a cheap home if you moved to like iowa. Its not as expensive but its not cheap like before.
  
  Yep. I'm about as smack-in-the-middle as you can get and our home has doubled in value since 2016.
- Systemic issue, California is just showing the rot stronger than other places. It's a growing issue for the whole country.
- Texas is getting hit hard because it's gone from very affordable to super expensive quickly.
  Homes in my area have tripled in cost over past 5 years.
  
  super expensive
  There are very few places in Texas that are super expensive.
- I didn't look at the list, but housing prices are out of control in a lot of places, even if they haven't hit that $1 million mark yet. A $750k starter home is just as absurd and out of reach for the vast majority of Americans.
  We're telling young people not to have kids and not to buy homes. And it's everywhere, not just California.

Why would Trudeau do this to the USA
Pierre Poilievre... Probably
- I hate that there are people who would agree with what you said.
- Look what biden has done to Canada!
  We need to be liberated!

Good news and bad news...
Good news is everyone in the Middle Class is a millionaire!
Bad news is there is no middle class anymore.

"A Thursday report from Zillow... "
Fuck you Zillow! You are mostly at fault as to why the housing market is such shit

I'm wondering what a "starter home" is in this case.
For me that'd be about 40sqm and 150k €
Are people buying bigger homes than they need?
- It's nearly impossible to find smaller homes in some areas of the US. I lucked out and bought an 800 sq ft home for my starter. I'm now in a 1600 Sq ft condo and it's more room than my partner and I need. I'm hoping to downsize.
- I lived in a house in Japan that was a rental. It was about 55sqm + loft with a parking space out front (which became my container garden). It was pretty good for the wife and I with me working from home (so using the 2nd bedroom as an office). I looked at what it would cause to buy a similar house used (far western Tokyo about 1.5 hours to Shinjuku station, neighbors on two sides the legally required 90cm or whatever it was away) -- 50 million yen give or take a bit. Someone might look at the price in USD or EUR or something and think it's not much, but it is for someone getting paid in said yen.
- I’m wondering about that too.
  In my area, i was above starter home (because of updates) on a 2 bedroom, 1 bath house built in 1946, on a fraction of an acre. But we have an older stock of houses. Where my brothers live, those are not even choices. Those towns really didn’t exist at that time, so most of the houses are much newer, much bigger, on much bigger lots
- America is deeply obsessed with single family homes.
  Most homes are 90 m² or larger. I'm in a medium sized city in the midwest and I have a 3 bedroom 130 m² home I got for 115€ but it's already inflated in value in the last 15 months to 138€. I wouldn't be able to afford the house I purchased 15 months ago, if I was house shopping now. And homes currently cost nearly double what they did in 2019.

Starter home? This is a finisher home! A dwelling of gods, THE GOLDEN GOD

Nobody knows what a "starter home" is anymore anyway. Sellers play them all up through the roof anymore

This smells like bullshit. I mean, if they define "Beverly Hills" as a city, I can see where it might be literally true, but I wouldn't call even the cheapest house in Beverly Hills, Scarsdale, or Paradise Valley a "starter" home. There's homes in the LA, New York, and Phoenix metros under $3-400k, if you're not so choosy about the neighborhood.
- From a canadian perspective, it sounds believable. About 10 year ago, you could get a new build on half an acre for 350k in my hometown. Today the oldest, run down, needs lots of renovations houses in the city on a quarter acre are going for over 400k. Those 350k new builds are easily into 700-900k range.
  My biggest mistake in life was not buying a house fresh out of high school, but i was an "idiot" who looked at housing as a place to live, not an investment.
  
  Stupid millennials, should have saved up our lunch money for a down payment and spent recess house hunting. If only we had known we were supposed to start saving for retirement ten years before we were born...
  
  Im pretty old but I often think about how much better off I would be if I got an associate degree and some certs and then bought a house asap.
- Beverly Hills is literally a city. It is autonomous from the Los Angeles city government. It has its own government and its own laws.
  And do please show me where the L.A. homes under $400k are. There weren't L.A. homes that cheap outside of Watts when we lived there over a decade ago and I'm not even sure about Watts.
  
  https://www.zillow.com/homedetails/20159-Cohasset-St-UNIT-9-Winnetka-CA-91306/68991194_zpid/ I'm sorry if that doesn't fit your criteria for a "L.A. home," but it is a place you can live, in Los Angeles, under $400k.
  But that's my point: some cities do not have any "starter" homes, at all, and defining a "starter home" as just the bottom third of every municipality is misleading bullshit. It implies that you need $1M to buy a home, and you don't.
  I agree that home prices have gotten crazy and unaffordable for many. I just want to have a realistic discussion of what that means so we can work on realistic solutions, and "you need $1M mortgage just to get your foot in the door" doesn't help.
- It's almost like we've let a ton of rich neighborhoods become cities so they don't have to pay as much in taxes and they can prevent their staff from living near them. Unless of course they want to live in the "staff quarters".

If that's even true, then that only means that most people can afford it. If nobody could afford it, then the prices wouldn't be this high.
- People going massively into debt isn't affordable.
- Corporations are buying up these houses faster than individuals and are pricing everyone out of the market. Then they offer them as rentals.
  
  Someone paying the rents? Seems like it's priced well then. This is how the free market works.
- The areas where these starter homes are so expensive are areas with big disparities in income. Let's look at the Bay Area, with all that tech money. There must be some people who can afford those prices. They are probably the ones making good money in the tech sector there. But then all their local services are provided by lower-paid people who can't live there.
  What happens when all those tech workers have kids? No matter where they send their kids for school, the teachers at that school can't afford to live there and probably have 90 min commutes each way just to find one of those "starter" homes to live in. Ditto for the librarians, and bus drivers, and day care providers. Even the grocery store clerks can't make enough to afford to live there.
- This is the opinion of someone completely unfamiliar with the current situation of housing, how we got here, or quite frankly economics in general.
  If the beginning and end of your understanding of this issue is supply/demand, you need... NEED to understand that you are objectively incorrect through lack of info. It is not a difference of opinion, you are flat out spittin some stup' rn
  
  I mean it is supply and demand, it's just ignorance of the extreme imbalance that's been created.
  In the rental market there's a cartel that needs to be dismantled but for buying homes it's more to do with the vacuum that is wall street investing in those homes as rental properties.

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