George Kamel - How Much a Starter Home Actually Costs Today (Can You Afford One?)

Episode Date: August 15, 2025

💵 Start your free budget today. Download the EveryDollar app! According to Zillow, a starter home now costs $1 million across hundreds of U.S. cities.In today's video, we’ll dive deeper into the numbers to see what's really happening in the housing market, and I'll tell youwhat it actually takes to afford a starter home in 2025. Next Steps: • 🎥 Watch my video Don’t Buy a Home Until You Watch This. • 🏠 Get our free Home Buyers Guide to help you buy the smart way. • 👩🏽‍💼 Find the best real estate agents. • 📈 Are you on track with the Baby Steps? Get a free personalized plan. • 📙 Order my book, Breaking Free From Broke, in hardcover.   Connect With Our Sponsors: • Get 20% off when you join DeleteMe. • Learn more about opening a high-yield savings account with Laurel Road. • Get up to 40% off Cozy Earth with code GEORGE. Explore More From Ramsey Network: 🎙️ The Ramsey Show 🍸 Smart Money Happy Hour 💸 The Ramsey Show Highlights 🧠 The Dr. John Delony Show 💡 The Rachel Cruze Show 🪑 Front Row Seat with Ken Coleman 📈 EntreLeadership   Ramsey Solutions Privacy Policy Learn more about your ad choices. Visit megaphone.fm/adchoices

In 233 U.S. cities, a starter home now costs $1 million. That's according to a recent analysis from Zillow. You know, the app you use to mentally renovate homes you'll never own. And if we're freaking out right now thinking you'll never be able to afford a house because of this, take a deep breath. That's a depressing headline, but it's not the whole picture. In fact, it's a bit misleading. And in today's video, we'll dive deeper into these numbers to see what's really happening in the housing market,

and I'll tell you what it actually takes to afford a starter home in 2025. Even if you don't have a million dollars. You know what? Especially if you don't have a million dollars. Okay, first of all, let's take a closer look at the numbers behind this dramatic headline. A recent analysis from Zillow looked at the cost of starter homes across different cities in America, and they found that, quote, in 233 U.S. cities, even a starter home costs $1 million. And that's up from 85 cities just five years ago.

And in case you're wondering, they define starter homes as properties in the bottom third of home values within each market. So we're not talking about luxury listings here. These are literally the least expensive homes available in each city, and they're at least a million dollars. But before you get your down payment in a wad, let's dig a little deeper here, because it's not quite as bad as it sounds. First of all, when Zillow says cities, they're not just talking about major metros like New York or L.A.

They're including suburbs, towns, even boroughs within larger metro areas. And TBAH, this feels a little misleading. Here's what I mean. 233 cities makes it sound. like these million-dollar starter homes are all over the place, implying this is a big problem. But get this, 48 of those 233 cities are all in what they consider to be

the New York City metro area. So that fact alone makes this headline at least a little less depressing. On a depression scale from one to emotionally manipulative commercials featuring dogs shivering to a Sarah McLaughlin song, it takes this down somewhere around a Peanuts cartoon. Profoundly sad for kids' content. And unsurprisingly, these men are...

million-dollar starter homes are mostly concentrated in states with big urban hubs where land is scarce. California leads the pack with 113 cities, which is about as surprising as Chip Gaines calling a homeowner because he ran into a thousand-dollar problem three-fourths of the way through an episode of Fixer Upper. So predictable, and yet I love it. New York follows with 32 cities, New Jersey with 20, and then Florida and Massachusetts each with 11. Not a lot of surprises here. The coasts do be like that. But I will say, this trend. has spread beyond just the typical high-cost areas. Since 2020, Michigan, Missouri, Kansas, and Wyoming have each added cities where starter homes now top a million bucks. And even freezing

cold Minnesota and cute little Rhode Island join the list for the first time this year. But still, this is not an all-over America thing we're talking about. Yes, home prices are really high and it's a tough time for first-time home buyers especially. I'm not going to sugarcoat that. But this headline is capitalizing on the drama big time. And frankly, I'm not surprised. Once again, You see a lot of this kind of thing on social media and in the news. Cherry-picking information to make things seem more juicy and scary than it actually is. It gets clicks, it gets shares, it gets people riled up, but it's not giving you the full story. And here's some additional context that will make you feel a whole lot better.

We're talking about 233 cities out of roughly 19,500 cities in America. That's around 1%. So let's edit this headline for them, shall we? 99% of U.S. cities have starter homes well under. $100 million. Not as clickable, is it? Not as salacious, not as titillating or bombastic, if you will. And they said signing up for the Thesaurus newsletter wouldn't come in handy. Let's ditch the Thesaurus, all right. Plus, even Zillow's press release admits the typical starter home in America costs, quote,

an attainable $192,514. Well, that's more palatable, even appetizing. And before you jump in the comments with, George, that's not accurate. I can't find anything that cheap for eyelids. Shut up. Shut up. Shh, I'll shut up. Remember, when we say starter home, we're talking about homes in the lowest third of home values in a given region. So you might need to adjust your zillow search criteria, maybe look at condos, townhomes,

or houses that Chip and Joe haven't shiplapped yet. Every house, they just lap the ship out of it. And that makes this episode... Not safe for homeschoolers. And if you truly can't find anything that affordable where you live, well, maybe you live in a very high cost of living area and for that, I am genuinely sorry. Okay, not really.

You can move if you want, no one's forcing you to live there. And no matter where you live, don't freak out when you see clickbait headlines and fear-mongering news stories like this. It's not all gloom and doom out there. And to prove it, let's look at some numbers that give us a more accurate picture of what the market is really like right now.

The median home sales price in the U.S. is around $419,000 as of Q1 of 2025. Now, that's still a lot of dollars, but it's a whole lot less than a million of them. And because it's the median, it means about half of all homes cost less than that. That's encouraging. And again, not as rage-inducing and clickable. Next, the Mortgage Bankers Association is projecting that 30-year mortgage rates will stabilize

around the 6.5% mark for the foreseeable future. Not great to what they used to be, but not catastrophic either. And by the way, if you're concerned about the housing market crashing in 2025, you can put those worries to rest. Prices are not expected to start drastically going down anytime soon. The Federal Home Loan Mortgage Corporation expects prices to grow in 2025. And here's some more data around supply and demand that can give us a better picture of the market. On the supply side, we're seeing a whole lot more sellers than buyers, which means it's slowly turning into a buyer's market.

And that's great if you're out there home shopping. That means you've got more negotiating power, more time to think it through, and a better chance of price cuts. And as far as demand goes, it depends. In some areas, homes are still flying off the shells with bidding wars to boot. In other areas, it's slower than a turtle stuck in molasses on a December morning. So if you're planning to sell your house, you've got to know what you're getting into. So work with a real estate pro who can help you price it right based on the actual comps in your area.

And know that it might take longer than it did in the olden days of the early 2020s. And if you want to find a real estate pro that I trust, I'll drop a link in the description below. So the bottom line here is, it's not all bad news in the housing market. But that doesn't change the fact that houses are expensive and interest rates are higher than they were just a few short. short years ago. So what if you're in the market for a new home? Should you buy now? Should you wait? Should you abandon the American dream and live in a van down by the river? Is a van down by the river the new American dream? So many questions, so little time. I'll give you my take on when to buy, but first, let's talk about where to keep your down payment savings. If you're setting aside a big

chunk of money and a norm core run-in-the-mill savings account, it's time to upgrade to a high-yield savings account like the one offered by Laurel Road, one of the sponsors of today's video. It's a financial no-brainer because with Laurel Road, your account balance earns top-tier APY. So if you're saving up for a downpayment on a home, that money could be earning some pretty sweet interest. Plus, with Laurel Road, there's no minimum of balance required to open an account, your deposits are FDIC insured, and there's no hidden fees. Learn more by going to laurel road.com slash George or click the link in the description. So if you're in the market for a home, you might be wondering if it's a smart move to wait a while and see what happens, or if it's better to just buy now. Well, here's what I would say to anyone looking to buy a home.

If you're financially ready, buy a home. If you're not, don't. Yeah, I'm going to write this down too, actually. That's a good point. Now, what does it mean to be ready financially? You've got to check off all of these boxes. First, you're debt-free. I don't care if it's credit, card debt, student loans, car payments, you owe your mom $20.

Get rid of all of it before you even think about a mortgage. Second, you have an emergency fund of three to six months of expenses saved up. Once you have that, debt-free plus emergency fund, you've got to focus on the down payment. And that's going to help you with our third parameter. Your monthly house payment on a 15-year fixed-rate mortgage should be around 25% or less of your monthly take-home pay. Now, that's your income minus taxes, but before any other deductions like health care premiums or retirement savings. What this does, it keeps you from being house-poor. And then fourth, you have a solid down payment.

Now, 5% to 10% is okay for first-time home buyers, but if we're really shooting for the moon here, I love 20% or more because you'll avoid PMI, private mortgage insurance, which just goes to the lender to protect them, not you. And a bonus tip, you've got to be prepared for closing costs. You've got to be able to cover that upfront without stealing from your down payment or your emergency fund. So if you can check off all those boxes, congratulations. Keep scrolling Zillow for a perfect little fixer-upper in a good school zone.

And if you don't meet these qualifications, it doesn't matter what the market's doing. You're not ready. And that's okay. Keep renting. Take your time to get your finances. is an order so that you can buy a house the right way. Trust me, it'll be worth it to do it with peace so that this house is a blessing and not a burden. And either way, don't let sensational, melodramatic, hyperbolic, histrionic headlines control your financial decisions. And if you're

feeling discouraged about home ownership right now, I get it. But know that all is not lost. It's challenging, but not impossible. I've seen countless people work the plan, get their finances together, and buy their first home the right way. And you can do this too. And if you want to step-by-step guide on exactly how to get into a home the smart way, check out the Ramsey home buying guide. It'll walk you through everything you need to know, from saving for a down payment to negotiating with sellers. I'll drop a link to that in the description below. And one final note, before you buy home, make sure that you're prepared unaware of the sneaky hidden costs of home ownership. If you want to know what those are, keep watching this next

video and click it or click the link in the description below. Don't forget to like and subscribe and share this video with all of your friends who are currently sobbing uncontrollably while doom scrolling Zillow. use a little pick me out. Thanks for watching. We'll see you next time.