Starter Homes Make a Comeback in the South and West

The path to homeownership is getting a little easier in some parts of America, and builders are leading the charge with a back-to-basics approach.

The South has added nearly 170,000 starter homes to the market since hitting rock bottom in 2022, while prices there have dropped 3.5% from their pandemic peak. The West has seen even bigger price improvements, with typical starter homes now costing 7.3% less than in 2022, especially in cities like Denver and Phoenix.

The turnaround comes from builders doing something surprisingly simple: focusing on smaller homes and lots that match what first-time buyers actually need and can afford. This shift in construction strategy has especially helped markets across the South and West recover from the pandemic housing crunch.

Hannah Jones, senior economist at Realtor.com, points out that aspiring homeowners haven't given up on their dreams. "First-time buyers aren't sitting on the sidelines because they don't want to own a home," she explains. The challenge has been finding homes within reach.

The Midwest continues to shine as America's most affordable region in absolute terms, with more than half of homes listed below $350,000. That gives buyers more options than they'll find almost anywhere else in the country.

The Bright Side

While the income needed to afford a starter home has climbed to about $78,000 nationally, up from $43,000 in 2019, the improving inventory tells a hopeful story. Builders have figured out that expanding supply through smart construction makes a real difference, and regions embracing new homebuilding are seeing genuine results.

The recovery hasn't reached everywhere equally. The Northeast faces tougher conditions, with starter homes now averaging $444,000 and prices still climbing. But the success in other regions proves the formula works: build more homes that match what buyers need, and affordability follows.

Jones notes many buyers are watching and waiting for the right moment, whether that means lower mortgage rates or more inventory hitting the market. The good news is that inventory is steadily improving in key markets, giving those patient buyers more to choose from than they've seen in years.

The housing market's gradual healing shows that practical solutions can tackle even stubborn affordability challenges, one new home at a time.