The affordability crisis within the housing market keeps reaching questionable milestones, and the most recent milestone exacerbates the difficulties facing first-time home buyers.
According to Zillow Report As of Thursday, the everyday entry-level home, defined as a house in the underside third of values in a given region, was value not less than $1 million in 237 cities – a record high. That’s nearly triple the pre-pandemic level of 84 such cities in 2019.
The lock-in effect within the housing market, where Fed rate hikes and resulting high mortgage rates discouraged owners from moving, has kept offers low.
In addition to weak supply, demand stays high, driving up property prices and deterring potential buyers from increasingly options.
The excellent news for first-time buyers, nonetheless, is that the majority of the cities where $1 million entry-level homes are the norm are concentrated in a handful of states, based on Zillow.
While half of all states have not less than one city with $1 million homes, nearly half of the national total is in California, which has 117 such cities. New York is next with 31, followed by New Jersey with 21, and Florida and Massachusetts with 11 each.
“Metropolitan areas with the most restrictive building codes tend to have the largest number of cities with $1 million homes,” Zillow said. “These are also markets with lower homeownership rates.”
According to the report, the everyday entry-level home nationwide is value $196,611, up 54.1 percent over the past five years, outpacing the 49 percent increase for homes overall during that period.
Meanwhile, earlier data from Zillow showed that homebuyers now need a 35 percent down payment to afford a typical home, up from the standard 20 percent. And the variety of cities where the median home price is not less than $1 million rose to 550 from 491 last 12 months.
However, there are some signs that the housing market is moving in buyers’ favor. Mortgage rates have dropped on expectations of a Fed rate cut later this 12 months, more listings have come onto the market, and builders are also increasing their supply. Potential homebuyers are even backing out of contracts at a record rate.
“With more homes for sale, buyers have more time to weigh their options,” Zillow said Thursday. “Rising housing inventory is also helping to shift negotiating power in buyers’ favor, as price reductions reach record highs this time of year.”
