Good morning, NREB readers.

As always, we're here to keep real estate professionals informed while cutting out the fluff. Let's get right into it.

There is some genuinely good news for entry-level homebuyers:

The worst of the starter-home inventory shortage appears to be behind us.

There are now roughly 220,000 more homes priced below $350,000 for sale than there were at the market's 2022 trough.

But zoom out a little farther and the recovery looks very different.

Compared with June 2019, there are still roughly 300,000 fewer homes under $350,000 available for sale nationwide.

Before the pandemic, 55.1% of active listings were priced below $350,000.

Today, that share is 37.6%.

So the entry-level market has improved considerably from its worst point.

It simply has not returned to anything resembling its old starting line.

There is no single national dollar amount that defines a starter home.

A $350,000 property may be relatively inexpensive in one metro, near the market median in another, and expensive in a third.

For that reason, Realtor.com's latest starter-home analysis looks at affordability in two ways.

One is an absolute measure: homes priced below $350,000, which gives us a consistent national threshold to compare over time.

The other defines a starter home relative to the local market, using homes priced at roughly 80% of an area's median listing price.

That distinction matters.

When we say there are 300,000 fewer homes under $350,000 than there were before the pandemic, we are describing a national price tier—not declaring that $350,000 is the correct starter-home cutoff in every city.

For an agent, the local threshold is the more useful one.

But the national numbers show just how dramatically the lower end of the housing market has changed.

Inventory is only half of this story.

The typical national starter-home threshold has climbed from about $256,000 in 2019 to $344,000 today.

That is an $88,000 increase.

And because mortgage rates are also substantially higher than they were six or seven years ago, the income required to buy that entry-level home has risen much faster than the price alone suggests.

Realtor.com estimates that a household needed roughly $43,000 in annual income to afford the typical starter home in 2019.

Today, it takes about $78,000.

Meanwhile, estimated median household income increased from around $69,000 to $88,100 over the same period.

Household earnings went up.

The price of admission went up much faster.

That is why an entry-level market can technically be improving while first-time buyers still feel like the door moved farther away.

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It would be equally misleading to look only at 2019 and conclude that nothing has improved.

Something has.

The starter-home market hit an extraordinarily difficult point around 2022, when pandemic-era price growth collided with extremely limited inventory.

Since then, the number of homes listed below $350,000 has increased by about 220,000 nationwide.

The affordable share of active inventory is also up 1.6 percentage points from a year ago.

Prices in portions of the South and West have retreated from their pandemic-era peaks.

Inventory has recovered.

Sellers in some markets have become more realistic.

And buyers with flexibility have more choices than they had during the frenzy.

So there are really two comparisons worth making.

Compared with 2022, the entry-level market looks meaningfully better.

Compared with 2019, it remains fundamentally altered.

Both statements are true.

Here is where the story gets more interesting.

You might expect 220,000 additional affordable listings to create a surge in entry-level transactions.

That has not happened.

Sales of homes priced below $350,000 were down roughly 10% year over year in April, according to Realtor.com's analysis, and were down 7.2% year to date.

So the market has more entry-level inventory than it did at the trough.

Yet fewer of those homes are changing hands.

That tells us the problem cannot be reduced to:

For many households, the issue has shifted from finding something for sale to being able to comfortably qualify for and carry the cost of what is available.

That distinction is crucial.

An inventory shortage and an affordability shortage can look similar from the outside because both produce fewer transactions.

They are not the same problem.

This is why comparing today's starter-home price directly with 2019 can understate what buyers experienced.

A $344,000 home today does not merely cost 34% more than a $256,000 home did then.

The financing environment changed too.

Realtor.com's analysis estimates that the typical monthly payment on a median-priced home has risen by more than 80% since 2019.

And the mortgage is not the only ownership expense that changed.

Depending on the market, buyers may also be dealing with higher:

property taxes,

homeowners insurance,

HOA fees,

maintenance costs,

and utility expenses.

Two homes with the same purchase price can produce very different monthly ownership costs depending on where they are located and how they are financed.

That means an entry-level buyer's search is increasingly constrained by total ownership cost, not merely the maximum purchase price appearing in the search filter.

The national average hides an enormous regional divide.

The South has experienced the strongest entry-level inventory recovery.

Before the pandemic, 60.6% of homes for sale in the region were priced below $350,000.

That share fell as low as 39.8% during the pandemic-era squeeze.

Today, it has recovered to 43.6%.

That represents nearly 170,000 more sub-$350,000 listings than at the trough.

New construction helped.

Builders in markets across Texas, Florida, the Carolinas, and other fast-growing areas responded aggressively to pandemic demand, adding housing at a pace many more supply-constrained markets could not match.

Now some of that inventory is reaching consumers at the same time demand has cooled.

The region's typical starter-home threshold also moved in the buyer's direction.

It peaked around $322,600 in 2022 and has since declined to approximately $311,200.

That is still substantially above its pre-pandemic level.

But it is a real correction.

The West tells a different version of the same recovery.

In the second quarter of 2019, 34.6% of Western listings were below $350,000.

At the 2022 trough, that share collapsed to just 13.3%.

Today, it has recovered to about 16.7%.

So entry-level inventory is improving.

It is also nowhere near its pre-pandemic share.

The region's relative starter-home threshold shows the same pattern.

It reached approximately $517,600 in 2022 before retreating to about $480,000 today, a 7.3% decline.

That is the largest pullback from the pandemic peak of any major region.

But a $480,000 starter-home threshold also illustrates why a national $350,000 cutoff needs context.

A buyer in parts of the West is operating in a completely different price environment than a buyer in Indianapolis, Cleveland, or St. Louis.

The Midwest still has the lowest entry-level prices of the four major regions.

Its typical starter-home threshold is roughly $263,920.

But affordability is a direction as well as a level.

The Midwest starter-home threshold has risen about 37.5% since 2019, from approximately $192,000.

Unlike the South and West, it has not pulled back from its pandemic-era high.

It is actually about 10% higher than it was in 2022.

That makes the Midwest a useful reminder that "most affordable region" does not necessarily mean "affordability is improving."

The starting point was lower.

The direction has still become more difficult.

For agents in traditionally affordable markets, that matters because local buyers often do not experience price growth relative to California or New York.

They experience it relative to what homes in their own community used to cost.

The Northeast is the toughest regional picture in Realtor.com's analysis.

Its starter-home threshold now sits around $443,600, nearly 50% above the pre-pandemic level of approximately $296,000.

And unlike the South or West, prices did not peak in 2022 and begin moving meaningfully backward.

They kept climbing.

The starter-home threshold is another 12.6% higher than it was in 2022.

The inventory picture is similarly difficult.

Before the pandemic, roughly 48% of listings in the Northeast were priced below $350,000.

Today, that figure is about 29.7%.

Limited developable land, slower construction, strong demand, and constrained existing inventory make it much harder for supply to respond.

So while a buyer in parts of Texas or Florida may finally be seeing meaningful entry-level options return, a buyer in the Northeast may wonder what recovery everyone is talking about.

Again, both experiences can exist inside the same national housing market.

Entry-level housing matters for more than first-time buyers.

Housing markets function in chains.

A household buys its first home.

Years later, that household may sell and move into a larger home.

The buyer purchasing that starter home may be entering ownership for the first time.

The seller of the larger home may then move somewhere else.

When the bottom rung of that ladder becomes harder to reach, the effects can move upward.

Fewer first-time purchases can mean fewer owners accumulating equity.

Fewer owners accumulating equity can eventually mean fewer move-up buyers.

Existing owners can also become reluctant to leave inexpensive mortgages behind, limiting the supply of older entry-level homes that traditionally returned to the market.

That helps explain why the starter-home question cannot be separated from the broader housing-supply problem.

The entry point feeds the rest of the system.

There is another subtle consequence of the shortage.

When buyers have fewer affordable choices, the homes available within their budgets may increasingly involve compromise.

Smaller square footage.

A longer commute.

An attached property instead of detached.

An older house.

Fewer updates.

Different neighborhoods.

More maintenance.

None of those characteristics automatically make a property a bad purchase.

But they matter when an agent is helping a buyer understand what "affordable" actually gets them locally.

The price range alone does not describe the inventory.

Two markets could both have 500 homes listed below $350,000 and offer completely different entry-level experiences depending on the age, location, property type, condition, insurance environment, taxes, and HOA costs attached to those homes.

That is why raw inventory counts are only the beginning.

The South's recovery also highlights an important supply lesson.

Markets that built more housing generally created more room for prices and inventory to adjust when demand weakened.

That does not mean every newly built home is affordable.

Far from it.

Construction costs, land, regulation, financing, and builder economics place practical limits on how cheaply new detached homes can be delivered.

But supply still matters.

In areas where builders added aggressively during the boom, buyers are now seeing more competition between sellers, more finished inventory, and in some cases softer pricing.

In markets where building remained severely constrained, there was less new supply available to produce that pressure.

This is one reason the post-pandemic housing market has fragmented so sharply by region.

The markets did not all build the same amount of housing.

Now they are not experiencing the same correction.

For working agents, the most useful thing to take from this report is probably not the national $350,000 figure.

It is the framework behind it.

Find your market's actual entry-level threshold.

If the local median listing price is $600,000, a $350,000 cutoff may exclude much of the realistic first-time-buyer market.

If the median is $275,000, $350,000 may include properties that are not entry-level at all.

Instead, identify the lower portion of the local market where first-time and moderate-income buyers are actually transacting.

Then track that segment separately.

How many homes are available?

What property types dominate it?

How quickly do they sell?

How often are prices being reduced?

How much has the segment recovered from 2022?

How does it compare with 2019?

Are new homes contributing to it?

Are condos carrying HOA costs that erase part of the apparent affordability?

Are insurance costs changing which properties buyers can realistically carry?

Those questions will tell you far more than whether national inventory rose.

The decline in sub-$350,000 sales despite improving inventory deserves particular attention locally.

If affordable inventory is accumulating, find out why.

Is the issue payment?

Condition?

Location?

Insurance?

HOA costs?

Taxes?

Property type?

A mismatch between seller expectations and what the buyer pool can support?

Or simply a shortage of qualified buyers at that level?

The answer will vary.

But a home sitting in an allegedly "affordable" price range is a signal worth investigating.

Affordable relative to the rest of the market does not necessarily mean affordable to the household that needs it.

The most realistic conclusion from the data is neither:

nor:

The market is slowly rebuilding from an extraordinary shortage.

There are 220,000 more sub-$350,000 listings than there were at the 2022 trough.

That is meaningful.

There are still roughly 300,000 fewer than there were before the pandemic.

That is meaningful too.

And where a buyer lives may determine which half of that story feels more true.

The South has made substantial progress.

Parts of the West have corrected.

The Midwest remains relatively affordable but is becoming more expensive.

The Northeast continues to struggle with severe constraints.

The national market is healing.

It is just healing at very different speeds.

For years, the starter home played a simple role in the American housing story.

It was not necessarily beautiful.

It was not necessarily large.

It might need work.

But it provided a relatively attainable first step into ownership.

That first step is now substantially more expensive than it was before the pandemic, and in many markets there are fewer homes available to take it.

The encouraging news is that the direction has finally improved.

The difficult news is that recovering from the worst point is not the same thing as recovering completely.

There are hundreds of thousands more affordable listings than there were four years ago.

There are hundreds of thousands fewer than there were seven years ago.

Both numbers belong in the conversation.

For agents, the opportunity is to stop treating "starter home" as one national category and understand exactly what the entry point looks like in your own market.

Because for the buyer trying to purchase their first property, the national recovery matters a lot less than one much simpler question:

What can I actually buy here?

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