The areas where these starter homes are so expensive are areas with big disparities in income. Let’s look at the Bay Area, with all that tech money. There must be some people who can afford those prices. They are probably the ones making good money in the tech sector there. But then all their local services are provided by lower-paid people who can’t live there.
What happens when all those tech workers have kids? No matter where they send their kids for school, the teachers at that school can’t afford to live there and probably have 90 min commutes each way just to find one of those “starter” homes to live in. Ditto for the librarians, and bus drivers, and day care providers. Even the grocery store clerks can’t make enough to afford to live there.