Texas Leads Nation’s Starter Home Upturn

AUSTIN – (By Dale King, Realty News Report) – A nationwide shortage of starter homes that peaked in 2022 is beginning to improve, says a newly released Realtor.com report. But the recovery is spotty and distributed unevenly across the U.S.

The unequal distribution is the report’s starkest discovery. Starter home price thresholds have fallen since 2022 in the South and West – with Texas and Florida leading the way in that revival. In the meantime, prices have continued to rise in the Midwest and Northeast.

Nationally, some 300,000 fewer homes on the market today are priced under $350,000 than in June 2019, so the typical starter home will cost potential buyers about $344,000, up from the $256,000 benchmark just seven years ago.

“The starter home story looks completely different depending on where you’re standing,” said Hannah Jones, senior economist at Realtor.com. “In the South and West, builders spent the last few years chasing demand at the entry level, and buyers there are seeing more choices and better prices than they had two years ago.”

In the Northeast, though, a construction response never happened. “Prices kept climbing even as the rest of the housing market cooled,” Jones said. “That deviation is why the recovery feels so different depending on where you live.” Starter home prices there have climbed 12.6% since 2022 and cost nearly 50% more than pre-pandemic levels.

The Texas Take on Starter Homes

Despite home price hikes during the past five years, Texas remains more attainable than many other states, says a Realtor.com report from earlier this year.

The starter home situation in the Lone Star State brings together moderate affordability, a recent construction boost and new state laws. Texas cities do, however, vary widely in affordability. But some urban centers stand out as strong selections for those seeking starter homes:

Houston – With a median starter-home price of $249,252, Houston offers ample inventory thanks to a steady stream of new construction over the years.
Dallas – Slightly higher at $284,739, Dallas continues to attract young buyers with job growth and diverse neighborhoods.
San Antonio – Although median prices here reach $339,950, many programs provide down payment assistance to facilitate affordability. It’s also short drive from Austin, which is a big draw.

Four Regions, Four Different Markets

The South notched the most significant success of any region, says Realtor.com. A construction boom in Texas, Florida and the Carolinas added nearly 170,000 affordable listings since the market’s 2022 low point — and starter home prices there have fallen back 3.5% from their peak. Starter home prices rose from $237,000 in 2019 to $323,000 in 2022 and down to $311,000 this year.

The West has seen the largest price drop of any metro, down 7.3% since 2022. Starter home prices out West rose from $368,000 in 2019 to $518,000 in 2022, then dropped down to $480,000 this year.

The Midwest remains the most affordable region in terms of hard dollars, but the advantage is wearing off. Starter home prices there are up 10% since 2022 and 7.5% since 2019, the steepest percentage hike of any region during that longer period. Prices rose from $192,000 in 2019 to $240,000 and up again to $264,000 this year.

The Northeast is the toughest area nationally. Just 29.7% of listings are priced under $350,000 today, down from roughly 48% before the pandemic, and the region’s starter home threshold rose to $444,000.

“The Northeast is the toughest market in the country right now for a first-time buyer,” Jones noted. “Limited land, restrictive zoning and buyers with real financial firepower have combined to push the entry price beyond what most middle-income households can even qualify for.”

More Listings, Fewer Sales

Despite inventory increases, affordable transactions have not followed. Home sales under $350,000 (the typical threshold for starter homes) fell about 10% in April 2026 compared with a year earlier and are down 7.2% year-to-date, a steeper decline than other price points.

“More listings on the market should mean more sales, but that’s not quite what we’re seeing,” said Jones. “Buyers can find a home priced under $350,000 in more places than they could two years ago. The problem now is qualifying for the mortgage. Rates are still in the mid-6% range, and the income it takes to buy a starter home has climbed more than 80% since 2019, so a lot of would-be buyers are simply sitting this one out.”

The Starter Home Squeeze

In June 2019, 55.1% of active listings nationally were priced under $350,000. Today, that percentage has fallen to 37.6%. The squeeze has hit the smallest homes hardest: two- and three-bedroom listings have risen 44.5% and 41.0% in price since 2019, outpacing 36.9% and 34.0% gains for four- and five-plus-bedroom homes.

Affordability is wearing away even faster than prices alone suggest. Today’s typical starter home buyer should have a minimum household income of roughly $78,000, up from just $43,000 in 2019 — an increase of more than 80%. Median household income, by comparison, has risen 28.3% over that same period — from about $69,000 to $88,100.

There are, however, signs of relief. Inventory priced under $350,000 has grown by 220,000 homes since the 2022 nadir — and the affordable share of listings is up 1.6 percentage points from a year ago.

“Higher rates have kept homeowners stuck in place, but we’re finally seeing cracks in the lock-in effect,” Jones said. “Every year, more owners hit a life event — a new job, a divorce, a retirement — that forces a move regardless of the mortgage rate, and that’s slowly working supply back into the market.”

Into The Future

The squeeze has reshaped who is buying a first home — and when. The average first-time homebuyer is now 40 years old and the entry-level buyer’s share climbed to 35% in May, up from 30% a year earlier. The U.S. still faces a housing shortage of roughly four million homes hindering any broad, near-term recovery.

The starter home market over the next five years faces a slow, uneven normalization rather than a dramatic reset. As the lock-in effect gradually fades, inventory continues to build. And household formation patterns shift. Younger, lower-income, first-time buyers without existing equity are likely to remain the most squeezed.