For many Americans, the path to buying a first home remains steep. Fewer than 40% of households that do not currently own a home can afford a typical starter property, according to a new LendingTree analysis.
LendingTree places the price of a typical starter home at $200,000, defining these entry-level properties as owner-occupied homes valued at the 25th percentile of the market. By that measure, just 38% of non-homeowner households have the financial ability to purchase one.
These homes are often more modest in size and may need repairs or upgrades compared with pricier properties, but they can offer buyers a crucial first step toward building equity. When entry-level homes are unavailable or unaffordable, many Americans lose access to what is widely viewed as one of the most important wealth-building opportunities.
Affordability pressures are especially visible in higher-cost markets. A separate recent study found that 242 U.S. cities now have starter homes priced at least $1 million. Zillow said earlier this month that the number of cities where entry-level homes cost seven figures or more has tripled since 2020.
Incomes falling short
According to LendingTree, non-homeowners would need to earn slightly more than $62,000 a year to afford a starter home. Their median income, however, is $55,000, creating a shortfall of more than $7,000 — roughly 13%.
Closing that income gap may be challenging, and in some cases unrealistic, said Matt Schulz, LendingTree’s chief consumer finance analyst.
“It’s safe to say that most people don’t get raises of $7,099 each year,” he said in a statement. “That means that bridging that gap might require a side hustle, a second job or other sacrifices. That’s tough, however, especially with how many other demands people already have on their time.”
In certain states, the affordability divide is far wider. In California, the median non-homeowner household earns $72,900 — $67,776 below the $140,676 needed to afford the state’s average starter home price of $482,000, LendingTree reported.
“For so many, it feels completely out of reach,” Schulz said. “It’s a shame because homeownership can be a powerful wealth-building tool and a real stabilizing force for families. However, the numbers involved are so daunting that many people don’t see a realistic way to get into the market.”
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Where starter homes are more affordable
In Rhode Island, the nation’s least affordable state for prospective starter-home buyers, just 16.5% of households can afford an entry-level home. Utah and Hawaii ranked second and third.
Southern states, by contrast, offer a more affordable path to homeownership for households that rank it as a top priority.
In Mississippi, nearly 62% can afford a starter home, followed by West Virginia (58%), Arkansas (54%) and Alabama (54%).
Aimee Picchi
