As real estate prices continue to rise, a starter home in a big city seems more of a myth than a reality.
However, according to a recent analysis by painting service provider Five Star Painting, there are 15 major U.S. cities where entry-level homes can be found for less than $230,000 on average. That’s far less than $431,000 – the average price of a home in the U.S., according to the latest data from the U.S. Census Bureau.
Starter homes generally refer to relatively modest homes that are affordable to first-time homebuyers or, more generally, lower-income homebuyers. In this context, the study defines a single-family home as a single-family home, townhouse or condominium with an area of 1,850 square feet or less. Mobile homes, land and apartment buildings were excluded.
Assuming a 10% down payment, buyers would need an income of around $56,500 (excluding other debts) to afford a $230,000 home, according to online broker Zillow’s affordability calculator. Of course, property prices vary by region, so buyers earning less may be able to afford an entry-level home in certain locations.
Based on Redfin real estate listings in the 50 largest U.S. cities, the following 15 markets had the lowest average price for entry-level homes in August 2023.
Detroit’s real estate market has recovered somewhat since the city declared bankruptcy a decade ago, but home prices remain well below the U.S. average.
A few reasons contribute to lower home prices in Detroit, including a declining population and a relatively high number of distressed home sales, in which an owner is forced to sell their home, usually because they cannot afford the mortgage payments.
Like Detroit, Cleveland is a Rust Belt city with a long-term population decline. Like most US cities, real estate prices in Cleveland have increased over the past three years, but are still well below the US median.
In general, the cheapest apartments can be found in smaller cities that are not large coastal centers. This includes cities in the Midwest like Indianapolis, but also cities in the South like Birmingham, Alabama.
In contrast, entry-level homes in San Francisco cost an average of $999,000, according to the study, making them the least affordable place to become a homeowner. At this price, it’s not an entry-level home at all, as homebuyers with a median US income of $74,580 wouldn’t be able to afford it without significant savings.
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