Real Estate Crisis: Fewer than 40% of U.S. Households Can Afford a Starter Home

Buying a first home remains out of reach for many Americans, with fewer than 4 in 10 non-homeowner households able to afford a typical starter home, a new LendingTree analysis found. A typical starter home costs $200,000, with LendingTree defining entry-level homes as owner-occupied properties valued at the 25th percentile of the housing market.

The analysis found that only 38% of households that don’t already own a home could afford one. Starter homes tend to be smaller and require more repairs or updates than higher-priced homes, but they often provide buyers with their first opportunity to build equity. Without access to entry-level homes, some Americans may be missing out on what is considered to be one of the biggest wealth-building opportunities.

Another recent study found that 242 cities across the U.S. now have starter homes that cost at least $1 million. The number of cities where entry-level properties cost at least seven figures has tripled since 2020, Zillow said earlier this month.

Incomes falling short: Non-homeowners need to earn just over $62,000 to afford a starter home. Still, their median salary is $55,000, leaving an income gap of more than $7,000, or about 13%, according to LendingTree’s analysis. Overcoming that deficit can be difficult to impossible, according to LendingTree chief consumer finance analyst Matt Schulz.