Another Top-10 List — Most (and Least Expensive) Starter Home Prices by State

The largest financial hurdle for most Americans is the purchase of their first home.  That cost, however, varies from state –to-state.   As usual, I invoke the TINSTAANREM axiom — There Is No Such Thing As A National Real Estate Market, nor is there such a thing as typical cost for a starter home.  The same goes for the median or average price of all homes within a state.   Even within states, median prices can vary significantly from one city to the next.

Business Insider reported on starter-home median prices by state,  calculated by Zillow as the lower-one third of all home values in each state as of March 2019.  That means that 67 percent (two thirds) of the housing stock was more expensive than the typical starter home.

The following tables show the 10 states having the greatest and least starter-home prices.   The median US home price for all housing was $259,700 at that time.  The District of Columbia, Hawaii and California all had starter-home prices that exceeded the median price for all housing across the country.  For the price of a typical starter home in Washington, D.C.(the most expensive state at $335,700), a buyer could acquire almost eight starter homes in West Virginia (the least cost at $42,300).

The cost of a home is a relative metric.   The effective cost to buy and own a home is a function of income, home prices, rental costs (as an alternative to owning), closing costs and the relative cost of living including recurring fees and expenses such as property taxes, ,maintenance, and homeowner or condo association dues.  The primary impediment for first-time buyers is accumulating the down payment.

The relationship between median prices for starter homes and all housing within a state varies significantly.   The following two tables show the states in which starter home costs are the greatest when compared to all housing and when they are the least.   The typical starter home median price in Rhode Island is 72.5 percent of the median for all housing – the largest comparative percentage for all states.  Michigan is the least with the typical starting costing just 38.2 percent of the statewide median price for all housing.

Including income in relation to price allows a comparison of affordability from one state to the next.   The next two tables show the ratio of the median price for all housing as a multiple of the median annual income per worker for those aged 16 and up working year-round fully employed, as taken from the U.S. Census Bureau’s American Community Survey.  Income data were as of 2017 but adjusted  for inflation.   While the median-priced home in Hawaii costs 13.2 times the median earnings of full-time workers, in West Virginia the median home costs just 2.4 times a worker’s annual wages.  Keep in mind that the number of earners per household also varies from state-to-state.  Therefore these multiples are not indicative of comparable affordability.

The following table shows all of the data and metrics sorted alphabetically by state and includes the District of Columbia.

To read the original report in Business Insider click

To download the graphic from click

Perhaps the best conclusion is that One Size never fits all when it comes to the cost of real estate, income and overall housing affordability.  As always, price is a function of the interaction of supply and demand.


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