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

The variety of U.S. metro areas the place starter houses value no less than $1 million has practically tripled since 2020, from 85 to 233. Zillow’s March 2025 research on the housing market revealed this beautiful soar in the price of entry-level houses. Whereas the typical nationwide worth for a starter house is $192,514, the growing variety of $1 million+ starter houses is a lingering results of pandemic-era worth progress.

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

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

Monetary consultants 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 you need to spend not more than 30% of your gross earnings on housing prices.

Understand that housing prices with a mortgage embrace:

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

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

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

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

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

The Residence Affordability Hole

You will have noticed an issue with the 30% rule: Housing prices proceed to rise whereas actual wages aren’t maintaining. This makes it more durable for owners (even these with increased incomes or the most effective intentions) to observe the rule.

Owners 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 information. This leaves households with much less earnings for necessities or monetary targets like faculty or retirement.

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

The Backside Line

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

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