Where the American dream is still alive for first-time buyersand where its slipping away

Budget buyers seeking entry into homeownership are finally getting some relief as the national supply of starter homes is beginning to improve.But like most aspects of the housing market, the recovery remains sluggish and starkly divided by region.A starter home is defined by Realtor.com economists as any listings priced below $350,000 nationally, or below 80% of a local market’s median list price.

For example, in Phoenix, where the median asking price sits at $489,500 as of June, the starter home threshold is roughly $391,200. Typically smaller and more modest than their pricier counterparts, starter homes serve as the first step on the property ladder for first-time homebuyers without the benefit of existing home equity. No-frills, low-cost starter homes have been in short supply for years.According to a new Realtor.com report released Monday, the inventory crunch peaked in 2022, when frenzied pandemic-era demand drove up real estate prices to record highs and left entry-level buyers with fewer options than at any point in recent history.

 Today, there are 220,000 more starter homes for sale than there were four years ago, and prices are down 4.2%, but Realtor.com senior economist Hannah Jones points out that this crucial market segment is still facing an uphill battle. There are still approximately 300,000 fewer low-cost listings now than there were in 2019, and the typical starter home comes with a nearly $90,000 premium. When mortgage rates are factored in, qualifying for a starter home now requires a household income of around $78,000, up from just $43,000 seven years ago.What’s more, the starter home market looks drastically different depending on the region, with the well-supplied South presenting the rosiest picture.Thanks to an accelerated pace of new construction, builders in the area have been able to meet demand.Since 2022, the Southern starter home price threshold dropped 3.5%, moving from $323,000 to $311,000. Meanwhile, the...