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I have ESTA for my family with the correct (home) address, but when I had to apply for a newborn baby I made a typo in the home address.

It is not one of the important passport data fields (like name, passport number, birthdate or city where you were born).

It's the address under "contact details", postal address.

Do I need to apply for a new ESTA?

I have read that if people move during the 2-year period of ESTA validity, they do not need a new ESTA. Also, the form does not check anything about existing addresses (like Amazon would do).

Can they change it at the airport?

It's just an obvious typo, such as writing Mew York instead of New York.

3 members of our family have the correct city name, one not.

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Don't worry. As far as I can tell the address is completely pointless, it's never checked or used for any purpose.

But if you want to update it anyway, you can do so from the official ESTA site for free, just check your status and update from there: https://esta.cbp.dhs.gov/individualStatusLookup

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