Starter Homes Cost $1 Million and Up in These US Cities. Here’s How Much You Have to Earn to Afford One

The number of U.S. metro areas where starter homes cost at least $1 million has nearly tripled since 2020, from 85 to 233. Zillow’s March 2025 study on the housing market revealed this stunning jump in the cost of entry-level homes. While the average national price for a starter home is $192,514, the increasing number of $1 million+ starter homes is a lingering result of pandemic-era price growth.

For its purposes, Zillow defined starter houses as homes among those in the lowest third of home values in a given region.

How Much Should You Spend on a Starter Home?

Financial experts have long recommended following the 30% rule when it comes to determining how much to pay for housing. This rule of thumb was established by the federal government, and it suggests you should spend no more than 30% of your gross income on housing costs.

Keep in mind that housing costs with a mortgage include:

• Loan principal
• Interest
• Property taxes
• Homeowners insurance

The recommendation was created to ensure homeowners could afford other living expenses like food, transportation, utilities, healthcare, and other costs associated with running a household. If more than 30% of your income is going toward putting a roof over your head, you may find yourself strapped to pay for other important necessities.

How Much Should You Earn to Buy a $1 Million Home?

If you purchase a $1 million home at an interest rate of 6.75% and put 20% down, your monthly payments would be:

Your total monthly payment would be $6,314.11. So, according to the rule, this shouldn’t be more than 30% of your gross income. You would need a monthly income of $21,047.03 (or an annual income of $252,564.40) to comfortably afford a $1 million home.

The Home Affordability Gap

You may have spotted a problem with the 30% rule: Housing costs continue to rise while real wages aren’t keeping up. This makes it harder for homeowners (even those with higher incomes or the best intentions) to follow the rule.

Homeowners are increasingly stretched, spending over 30% of their income on housing. In May 2025, the housing cost-to-income ratio was 34.75%, based on Investopedia’s housing affordability data. This leaves households with less income for essentials or financial goals like college or retirement.

Investopedia tracks home prices, mortgage rates, income, and more to generate a housing cost-to-income ratio. The data shows a significant gap between median monthly incomes and the income required to follow the 30% rule:

The Bottom Line

Homeowners, especially those looking for starter homes, face an affordability challenge. The pandemic-era increase in housing prices, coupled with higher mortgage rates, makes it hard for wages to keep up. This pushes homeowners to spend more on housing at the expense of other necessities or financial goals.

If you’re a first-time homebuyer, it’s important to research housing costs and mortgage rates to ensure you get the best deal. Requesting mortgage quotes from several lenders could end up saving you a considerable amount on your mortgage payments.