You Can Put Less than $50,000 Down on a Starter Home in These 15 Cities

The dream of owning a house is one that many of us aspire to, but in many cities across the U.S., homeownership can feel like an unattainable goal -- especially for those just starting out. However, there is good news for prospective buyers on a budget: starter homes you can buy with a lower down payment can still be found in some cities.

Home prices hit all-time highs

Since the pandemic, the average sale price of homes has gone up by close to 40% to $516,500 as of Q1 2023, hitting all-time highs. This is great news for homeowners, as it signifies that the real estate market is strong and healthy.

However, prospective buyers may find it more challenging to afford a house, especially in areas where the demand for homes is high. The pandemic caused a surge in demand for housing, as people were spending more time than ever before at home. In addition, interest rates were at historic lows.

At the same time, there has been a limited supply of homes on the market, especially starter homes. This combination of high demand and low supply has resulted in a spike in home prices across the United States.

As a result, buyers have faced fierce competition, with bidding wars and homes selling above asking price becoming increasingly common.

The number of starter homes at all-time lows

Starter homes, a popular choice in the past for first-time home buyers, are now a rare commodity. Also referred to as an entry-level home, they are typically the initial purchase for home buyers and generally sized less than 1,400 square feet.

Once regarded as small, affordable houses for young individuals or families to enter the real estate market, they now signify the least expensive homes within a particular market. In addition, it is not just renters and young families who are seeking these homes. Downsizing baby boomers, second-home buyers, and property investors are now competing directly with first-time buyers for this shrinking housing sector.

Starter homes used to account for around 70% of all new homes built in the 1940s. That number fell to 40% in 1980, and by 2019 had dwindled to just 7%. This decline in supply of starter homes has caused prices to surge and made homes much more unaffordable.

These homes are also now much harder to find and significantly more expensive for first-time home buyers. As a result, many families are struggling to purchase their first home and step on the property ladder.

15 cities with the most affordable starter homes

For first-time home buyers, it's no secret that the housing market can seem daunting and unattainable. However, there are smaller secondary cities across the U.S. that still have starter homes available at reasonable prices.

Point2 compiled a list of median prices for homes under 1,400 square feet in the 100 largest secondary markets in the country. The data shows that 15 of these towns have average required down payments of $50,000 or less (assuming a 20% down payment), making them more affordable for those just starting out.

This information can be especially helpful for home buyers trying to match the cost of a starter home to their yearly income. While the market may not be the easiest to navigate, these lesser-known cities could offer a realistic way for potential home buyers to break into the market.

While purchasing a starter home can still prove to be a challenge, it's worth considering looking outside of major cities for more affordable options.

While they may not be as plentiful as they once were, some cities still offer affordable starter homes where a 20% down payment comes out to less than $50,000. Whether you're looking to relocate to a new city or take your first step on the property ladder, these 15 cities offer attractive options for those interested in homeownership. With a little bit of research, and perhaps some patience, you can still achieve the great American dream of owning your own home!