Homebuyers, rejoice — starter home inventory is on the rise with 220,000 more listings on the market than in 2022, according to Realtor.com’s latest report.
However, there’s an important caveat: These homes are 32 percent more expensive than they were pre-pandemic, mostly concentrated in the South and Midwest, and are drawing more competition than other market price points, meaning that younger, lower-income households are still finding themselves on the outs.
“The dream of buying a first home has always come with compromises like a smaller yard, a longer commute, or perhaps a fixer-upper kitchen,” the report read. “But today’s first-time buyers face something far more daunting than a few aesthetic trade-offs. The starter home as Americans have long understood it — modestly priced, widely available, a launchpad to building wealth — is increasingly scarce in parts of the country.”
Nationally, starter home inventory — homes priced under $350,000 — accounts for 38 percent of the market. That’s 17.6 percentage points below pre-pandemic norms but 0.1 percentage point above the 2022 homebuying peak. That shortage has driven the cost for the typical starter home from $256,000 to $344,000, and when mortgage rates are factored in, homebuyers need a minimum annual income of $78,000 to qualify — up from $44,000 in 2019.
On a regional level, the story is fractured, with the South and Midwest offering the best opportunities for buyers to snag a reasonably priced home. But the South has a better long-term outlook, with homebuilders effectively keeping up with demand.
The typical starter home in the South is $311,200, 36.3 percent above the pre-pandemic average of $236,720, but 3.5 percent below the 2022 peak of $322,600. This is the only region to see home prices soften, with homebuilders, primarily in Texas, Florida and the Carolinas, pushing starter-home inventory levels up 3.8 percentage points to 43.6 percent since 2022.
The Midwest is currently the most affordable, with the typical starter home costing $264,000. However, that might not continue to be true in the coming years.
“Starter home prices in the region rose 37.5 percent between 2019 and 2026, from $192,000 to $263,920, a steeper percentage increase than either the South or West over that period,” the report read. “Unlike the South and West, Midwest prices have not pulled back from their post-pandemic levels; the 2026 threshold is the highest on record for the region, up 10 percent from 2022 alone.”
The share of affordable homes for sale has dropped from 70.9 percent in Q2 of 2019 to 55 percent in Q2 of 2026. That’s primarily due to skyrocketing interest in the region from homebuyers on the coasts who’ve been priced out of their markets, but can easily afford homes in Chicago, Milwaukee, Cleveland and other Midwestern hotspots.
“The dynamic reflects a market where demand has remained durable even as other regions cooled,” the report read.
As for the coasts, they continue to be the worst regions to find a starter home. Although the West is experiencing an encouraging inventory boost, it’s not enough to meaningfully bring down starter home prices, which are at a staggering $480,000.
Meanwhile, the East is still in the throes of a starter-home inventory crunch due to a lack of space to expand cities outward and restrictive zoning laws that make it difficult to pursue more creative inventory solutions for already-dense metros.
“Entry-level homeownership in the region’s major metros is increasingly a prospect reserved for buyers with significant existing wealth, family assistance, or very high incomes,” the report said of the East Coast.
Although most regions have made meaningful moves to improve starter-home inventory, Realtor.com said more supply hasn’t led to more sales. Home sales under $350,000 fell roughly 10 percent year over year in April 2026 and are down 7.2 percent year-to-date, a steeper decline than other price levels.
Homebuyers, especially younger households with lower incomes, are taking one of three routes: pushing themselves to the top of their budgets to compete in their current markets, relocating to cheaper cities or, third, which is increasingly becoming the main choice, opting out of homeownership.
“Our best expectation is that the starter home market over the next five years looks like a slow, uneven normalization rather than a dramatic reset. Prices are unlikely to fall significantly at the national level, but price growth should continue to moderate,” the report read. “However, the households most squeezed by today’s market, namely younger, lower-income, first-time buyers without equity to roll forward, will likely continue to face the most difficult conditions.”
