A new report from Realtor.com reveals the national starter home shortage, which peaked in 2022, is beginning to ease. New data shows there are roughly 300,000 fewer homes priced under $350,000 on the market today than in June 2019, and the typical starter home now costs $344,000, up from $256,000 seven years ago.
Entry-level buyers in the South and West are seeing more affordable listings and softening prices, while buyers in the Northeast face an increasingly tight market. Starter home prices there have climbed 12.6 percent since 2022 and now sit nearly 50 percent above pre-pandemic levels, according to the report.
“The starter home story looks completely different depending on where you’re standing,” said Hannah Jones, senior economist at Realtor.com. “In the South and West, builders spent the last few years chasing demand at the entry level, and buyers there are actually seeing more choices and better prices than they had two years ago. In the Northeast, that construction response never happened—prices kept climbing even as the rest of the housing market cooled. That divergence is exactly why the recovery feels so different depending on where you live.”
In June 2019, 55.1 percent of active listings nationwide were priced under $350,000. Today, that figure has fallen to 37.6 percent. The squeeze has hit the smallest homes hardest. Two- and three-bedroom listings have increased in price 44.5 percent and 41 percent, respectively, since 2019, outpacing gains of 36.9 percent and 34 percent for four- and five-plus-bedroom homes.
The report also found that affordability has eroded even faster than prices alone suggest. Today’s typical starter home requires a recommended minimum household income of roughly $78,000, up from $43,000 in 2019—an increase of more than 80 percent. By comparison, median household income has risen 28.3 percent over the same period, from about $69,000 to $88,100.
There are, however, signs of relief. Inventory priced under $350,000 has grown by 220,000 homes since the 2022 low, and the affordable share of listings is up 1.6 percentage points from a year ago.
“Higher rates have kept homeowners stuck in place, but we’re finally seeing cracks in the lock-in effect,” said Jones. “Every year, more owners hit a life event—a new job, a divorce, a retirement—that forces a move regardless of their mortgage rate, and that’s slowly working supply back into the market.”
Starter home price thresholds have fallen since 2022 in the South and West, even as they continue to rise in the Midwest and Northeast. The South has seen the strongest recovery. A construction boom in Texas, Florida and the Carolinas has added nearly 170,000 affordable listings since the 2022 low, and starter home prices have fallen 3.5 percent from their peak.
The West has recorded the largest price decline of any region, down 7.3 percent since 2022, led by improvements in Denver, Phoenix and Colorado Springs, though coastal California markets such as Los Angeles and San Francisco have seen less relief.
The Midwest remains the most affordable region in dollar terms, but that advantage is shrinking. Starter home prices are up 10 percent since 2022 and 37.5 percent since 2019, the largest percentage increase of any region over that period.
The Northeast remains the nation’s toughest market for first-time buyers. Just 29.7 percent of listings are priced under $350,000, down from roughly 48 percent before the pandemic, and the region’s starter home threshold has climbed to $444,000.
“The Northeast is the toughest market in the country right now for a first-time buyer,” said Jones. “Limited land, restrictive zoning, and buyers with real financial firepower have combined to push the entry price beyond what most middle-income households can even qualify for. Unlike the South and West, there’s been no pullback there—the trend is still moving in the wrong direction.”
Despite improving inventory, affordable home sales have not rebounded. Sales of homes priced under $350,000 fell about 10 percent in April compared with a year earlier and were down 7.2 percent year to date, a steeper decline than in other price tiers.
The South, despite leading the nation in inventory recovery, saw affordable sales fall 7.3 percent in April. The Midwest posted the steepest decline, down 13.5 percent year over year. The Northeast was the only region where sales fell across every price tier, while the West was the outlier, with sub-$350,000 sales essentially flat for the year.
The report said the affordability squeeze has reshaped who is buying a first home and when. The average first-time homebuyer is now 40 years old, although the share of first-time buyers climbed to 35 percent in May, up from 30 percent a year earlier. The U.S. still faces a housing shortage of roughly 4 million homes, the report said, limiting the potential for a broad near-term recovery.
