U.S. cities where starter homes are affordable

With homeownership costs doubling since last year, the market for starter homes has become unaffordable for most buyers in all but four major U.S. cities, according to a recent study published by real estate site Point2.

Those cities are:

• Detroit
• Tulsa, Oklahoma
• Memphis, Tennessee
• Oklahoma City

Starter homes are generally thought of as the first home a family can purchase, so they tend to be smaller and cheaper than other homes listed for sale. But due to homeownership costs, the starter home is becoming the “stuff of myths,” according to Point2.

For the purposes of Point2’s analysis, starter homes are those valued in the bottom third of all homes available in a given market. To measure affordability, the study follows the common personal finance rule that a mortgage payment shouldn’t exceed 30% of a homeowner’s gross monthly income.

Here’s a closer look at the four cities where starter homes are actually affordable for those earning the area’s median household income.

Median annual income: $25,004

Income needed to afford a starter home: $19,103

Median starter home price: $48,129

Aside from a chronic shortage of housing that predates the Covid-19 pandemic, supply constraints and growing costs for building materials have contributed to increasing home prices, says Lawrence Yun, chief economist at the National Association of Realtors.