According to Zillow, the average starter home nationwide costs $196,611, affordable for a middle-income household. Zillow defines starter homes as those in the lowest third of home prices in an area.
However, starter home prices have risen 54.1% over the past five years, outpacing the 49.1% rise in the price of all homes over the same period. At least thirteen states nationwide now have a city or town that has an original home price of $1 million or more. California leads with 71 cities, New York with 11 cities and Washington with 8 cities of expensive housing. Florida, Maryland and Virginia also have at least one high-cost city.
Persistent housing shocks from rising home prices, high mortgage rates and a lack of inventory have left many prospective buyers on the sidelines. As a result, homeownership is out of reach for young Americans. The average age of shoppers reached 35 last year, up a year from 2019.
First-time home buyers are a dominant group of investors, according to Divounguy. The share of first-time home buyers fell to 29 percent in June from 31 percent in May, the National Association of Realtors said.
Housing affordability struggles are partly a result of the Federal Reserve's effort to curb inflation through tighter monetary policy, with the Fed's benchmark interest rate currently at a 23-year high. Higher mortgage rates have been a major way the Fed's policies have affected the economy. However, mortgage rates have recently moved lower to one-year lows as investors price in rate cuts from the Fed. The average interest rate on a 30-year fixed-rate mortgage fell to 6.47 percent from 6.73 percent last week, Freddie Mac said.
