Starter Houses Value $1 Million and Up in These US Cities. This is How A lot You Must Earn to Afford One

The variety of U.S. metro areas the place starter houses value at the very least $1 million has practically tripled since 2020, from 85 to 233. Zillow’s March 2025 research on the housing market revealed this beautiful leap in the price of entry-level houses. Whereas the typical nationwide value for a starter house is $192,514, the rising variety of $1 million+ starter houses is a lingering results of pandemic-era value development.

For its functions, Zillow outlined starter homes as houses amongst these within the lowest third of dwelling values in a given area.

How A lot Ought to You Spend on a Starter Dwelling?

Monetary specialists have lengthy advisable following the 30% rule in the case of figuring out how a lot to pay for housing. This rule of thumb was established by the federal authorities, and it suggests it is best to spend not more than 30% of your gross earnings on housing prices.

Remember the fact that housing prices with a mortgage embody:

• Mortgage principal
• Curiosity
• Property taxes
• Householders insurance coverage

The advice was created to make sure householders may afford different residing bills like meals, transportation, utilities, healthcare, and different prices related to working a family. If greater than 30% of your earnings goes towards placing a roof over your head, chances are you’ll end up strapped to pay for different essential requirements.

How A lot Ought to You Earn to Purchase a $1 Million Dwelling?

If you are going to buy a $1 million dwelling at an rate of interest of 6.75% and put 20% down, your month-to-month funds could be:

Your complete month-to-month fee could be $6,314.11. So, in accordance with the rule, this should not be greater than 30% of your gross earnings. You would want a month-to-month earnings of $21,047.03 (or an annual earnings of $252,564.40) to comfortably afford a $1 million dwelling.

The Dwelling Affordability Hole

You’ll have noticed an issue with the 30% rule: Housing prices proceed to rise whereas actual wages aren’t maintaining. This makes it tougher for householders (even these with larger incomes or the very best intentions) to comply with the rule.

Householders are more and more stretched, spending over 30% of their earnings on housing. In Could 2025, the housing cost-to-income ratio was 34.75%, primarily based on Investopedia’s housing affordability knowledge. This leaves households with much less earnings for necessities or monetary targets like faculty or retirement.

Investopedia tracks dwelling costs, mortgage charges, earnings, and extra to generate a housing cost-to-income ratio. The information reveals a big hole between median month-to-month incomes and the earnings required to comply with the 30% rule:

The Backside Line

Householders, particularly these in search of starter houses, face an affordability problem. The pandemic-era improve in housing costs, coupled with larger mortgage charges, makes it onerous for wages to maintain up. This pushes householders to spend extra on housing on the expense of different requirements or monetary targets.

Should you’re a first-time homebuyer, it is essential to analysis housing prices and mortgage charges to make sure you get the very best deal. Requesting mortgage quotes from a number of lenders may find yourself saving you a substantial quantity in your mortgage funds.