Zillow's list of America's hottest housing markets in 2024 showed that most of the top 10 real estate markets had median home prices significantly below the national average. Rising home prices and interest rates have undoubtedly changed the way Americans buy homes. Housing has now become so expensive that America is down to only four "big cities" with starter homes under $125,000.
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At that time, inexpensive "starter homes" were readily available in most of America's major metropolitan areas. Although big cities like New York, Los Angeles and Chicago always had prohibitively expensive enclaves, buying affordable starter homes in their metro areas was still possible as recently as 25 years ago. That was the past. Now, a study by Redfin has revealed that Detroit, Michigan, is America's last city with starter homes under $100,000.
According to Redfin, the median price of a home in the "motor city" is a very affordable $67,500. However, you may want to strike while the iron is hot if you're looking for a bargain. The current $67,500 sale price represents a 15.88% year-on-year increase from 2023. If they continue to appreciate at that rate, you could be sitting on a mountain of equity before your mortgage is halfway paid off.
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Pittsburgh, Pennsylvania, has the second cheapest housing market among America's major cities and checks in with an average home price of $117,500. The current price is up 13.59% from 2023, but the "steel city" is still very affordable. Pittsburgh's economy used to revolve around the steel industry, but it's developing a reputation as a biotech hub. It's also home to the University of Pittsburgh and Carnegie Mellon University.
Another Midwest city, Cleveland, Ohio, has an average home price of $125,000. Cleveland is home to the Rock and Roll Hall of Fame as well as MLB, NFL and NBA franchises. The city's lakefront area has been redeveloped into a highly desirable entertainment destination. Cleveland was on Zillow's top 10 hottest real estate markets list and Redfin says Cleveland homes spend an average of 21 days on the market.
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If there is one drawback that Pittsburgh, Cleveland and Detroit have in common, it's cold weather. All three cities are known for long, harsh winters, so you'll want to use some of the money you save on your home to buy a good winter coat. However, there is one remaining metro area with homes priced under $125,000 if the idea of an upper Midwest Winter is too much for you.
St. Louis, Missouri's median home price is $125,000 and it got there by climbing 8.7% since 2023. St. Louis has historically been known as the "gateway to the west" and is perhaps most famous for being the home of Anheuser-Busch. Anheuser-Busch is one of the world's largest beer makers and a major employer in the St. Louis area. The summers are humid, but the winters are generally warmer here than in Pittsburgh or Detroit.
There is no doubt that the affordability of starter homes in markets like Cleveland, Detroit, St. Louis and Pittsburgh will continue to draw buyers and drive property values up. That makes this an ideal time for first-time homebuyers and real estate investors to go bargain hunting in those markets. It's unlikely that starter homes in these markets will be affordable for much longer.
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