The number of US Metro areas where starter homes cost at least $1 million has almost tripled since 2020, from 85 to 233. A March 2025 housing market survey revealed this spectacular jump in entry-level housing costs. The average national price for starter homes is $192,514, but the increase in starter homes over $1 million is a prolonged result of price growth during the pandemic era.
To that end, Zillow defined a starter house as a home within a home with at least one third of the home value in a particular area.
Key takeout
How much should I spend on a starter’s house?
Financial experts have long been recommended by following the 30% rule when deciding how much to pay for a home. This rule of thumb is established by the federal government and suggests that less than 30% of your total income should be spent on housing expenses.
Please note that home costs on a mortgage are as follows:
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This recommendation was made so that homeowners can pay other living expenses, including food, transportation, utilities, healthcare and other expenses related to the operation of the home. If more than 30% of your income is directed at placing a roof over your head, you may find yourself tied up to pay for other important essentials.
How much should I make to buy a million dollar house?
If you buy a $1 million home with a 6.75% interest rate and cut it by 20%, your monthly payments are as follows:
The total monthly payment is $6,314.11. Therefore, according to the rules, this should not exceed 30% of your total income. A monthly salary of $21,047.03 (or annual income of $252,564.40) is required to provide a comfortable $1 million home.
The affordable price gap of the home
It is possible that a problem has been discovered in the 30% rule. Housing costs continue to rise, but actual wages are not maintained. This makes it difficult for homeowners (even those with high income or with the best intentions) to follow the rules.
Homeowners are increasingly growing, spending more than 30% of their income on homes. In May 2025, the housing cost-to-income ratio was 34.75% based on Investopedia’s housing affordability data. This will reduce household income for necessities such as university and retirement and financial targets.
Investopedia tracks home prices, mortgage fees, income, and more, generating a home cost-to-income ratio. The data show a significant gap between the median monthly income and the income required to follow the 30% rule.
Conclusion
Homeowners, especially those looking for a starter home, face the challenges of affordability. The rise in home prices during the pandemic era, coupled with rising mortgage rates, makes it difficult to keep up with wages. This will encourage homeowners to spend more on their homes at the expense of other essentials and financial goals.
If you are a first-time home buyer, it is important to research your home and mortgage fees to get the best deal. Requesting multiple lenders for a mortgage estimate can ultimately save you a significant amount of money on your mortgage payments.
