Look, I've been watching this starter home story pretty closely, and according to Realtor.com Research, we're finally seeing some real relief after years of pain for first-time buyers. The research team defines starter homes as properties priced around 80% of what the median home costs in a given area, so we're really talking about the entry point for people trying to build wealth through homeownership. What happened is that pandemic demand crashed into almost no inventory, prices shot up like crazy, and then when interest rates doubled, homeowners just sat tight on their mortgages. It was a perfect storm that left first-time buyers in the worst position in recent memory.
Here's where the numbers really tell the story. Before the pandemic in 2019, about 55% of homes for sale were priced under $350,000. Today that's dropped to 38%, which means roughly 300,000 fewer affordable homes on the market. The typical starter home has jumped from $256,000 to $344,000 since 2019. What kills me is that to qualify for that price now, you need around $78,000 in household income, up from $43,000 seven years ago. Median incomes only rose about 28%, so there's a huge mismatch between what people earn and what they need to qualify for a mortgage.
The encouraging news is that conditions are slowly improving. Compared to the worst of it in 2022, there are now 220,000 more homes for sale in that sub-$350,000 range, and interest rates have backed off from those scary highs. People have more options than they did two years ago, and monthly payments aren't climbing higher anymore. But here's the thing—this recovery is happening very unevenly across the country.
The South is really the bright spot here. Places like Texas, Florida, and the Carolinas saw builders respond to the boom by actually building more homes, and that inventory is hitting the market now when demand has cooled. The typical starter home price in the South peaked at about $323,000 in 2022 and has actually come down since then. The share of homes under $350,000 has climbed back up to about 44% from a low of 40%, and buyers down there have real negotiating leverage.
The West is trickier. Starter home prices there hit an almost shocking peak of around $518,000 in 2022—well beyond what most first-time buyers can realistically afford. They've come down about 7% since then, which is the biggest pullback of any region, and places like Denver, Phoenix, and Colorado Springs are actually approaching pre-pandemic affordability. But the West still struggles with only about 17% of homes priced under $350,000, which is still way below the pre-pandemic 35%.
What I'm seeing locally here in the Bay Area and Fremont is that we're caught in this Western pattern of improvement, but we're still a long way from easy entry-level homeownership. The region absolutely needs more modest homes hitting the market, and while some pressure is easing compared to the peak crisis, our threshold for what counts as a starter home is so much higher than the national average that most first-time buyers I talk to are still stretching harder than they should. We're moving in the right direction, but our particular market challenges mean we're not seeing the relief that buyers in Denver or Phoenix are experiencing.
