Why Most First-Time Home Buyers Skip Starter Homes for ‘Forever Homes’

First-time homebuyers are increasingly passing up smaller, more affordable starter homes, choosing to wait for their forever home and avoid the hassle of upgrading later in life.

Sixty-five percent of U.S. homebuyers expect their first home purchase to be their last, while more than half of today’s Gen Z and Millennial homeowners (52%) believe they will stay in the first home they purchased for the rest of their lives. BMO Index for real financial progress.

Meanwhile, 58% of non-homeowners say the traditional approach of buying a starter home, then trading it for a larger, more luxurious home down the street, simply “doesn’t make sense these days.” Rather than weathering the market multiple times, they prefer versatile properties that can adapt to their changing needs and life stages.

“As more first-time buyers enter the market later in life, they are no longer looking for a starter home, but rather a home that fits their stage of life and family needs,” says Paul Dildahead of U.S. consumer strategy at BMO.

Chris Grimesa real estate agent Corcoran Reverie in Nashville, Tenn., says he’s increasingly seeing starters bypassing the traditional starter home route.

“I recently worked with a startup who did just that, and it was exciting to see,” says Grimes Realtor.com®. “The pride they felt in not only becoming homeowners, but purchasing a home that even their parents could comfortably enjoy, was undeniable. It’s a big emotional milestone, and you really feel it when you hand over the keys.”

Realtor.com senior economic research analyst Hannah Jones notes that the declining popularity of starter homes is rooted in harsh market realities.

“Starter homes are becoming increasingly expensive and difficult to obtain, prompting more buyers to skip the ‘starter home’ on the property ladder altogether,” she says.

Grimes points out that forever homes have a steeper learning curve than smaller, simple starter homes, which tend to be simpler and easier to maintain and update.

“With a forever home, especially one with high-end finishes and complex systems, first-time buyers are suddenly responsible for maintaining things like high-end appliances, specialty materials and more complicated mechanical components,” says the broker. “I worry that when these items break, the cost of repairs could be a real shock to someone who has never owned one before and may not have budgeted for that level of maintenance.”

How one-time purchases impact the market

The BMO research explains that the shift away from starter homes is closely tied to recent trends in U.S. homeownership, including its slower timeline, with the average age of the typical first-time homebuyer rising to a record high of 40 years old by 2025, compared to just 28 years old in the 1990s, according to research data from the National Association of Realtors®.

“This 12-year shift compared to the early 1990s represents an entire decade of wealth building lost to renting,” Jones says. “Buyers are entering the market older, better prepared financially and much less willing to compromise on a home they plan to live in for decades. That’s exactly why the forever home has replaced the starter home as a target.”

Moreover, many buyers only begin the search for their first home after starting a family of their own. The BMO index shows that 2 in 5 home seekers currently on the market have at least one child.

For the housing market, Jones says the forever-home trend could reduce inventory turnover, which typically results from owners releasing their starter homes as new offerings for first-time buyers, usually couples or young families.

“Breaking this cycle could exacerbate the supply shortage as fewer households move,” the analyst said. “However, how these dynamics affect different parts of the market will depend on how demand for starter homes compares to demand for forever homes, and whether supply can keep up.”

In Nashville, Grimes says most of the city’s recent development has focused on larger, more expensive homes with broad appeal that are designed to sell quickly and yield higher margins for builders, but are out of reach for many first-time buyers.

“The result is a shortage of what we used to consider starter homes,” says the real estate agent. “When first-time buyers skip the starter home and stretch to a nicer forever home, it can inadvertently reinforce this cycle. Builders see continued demand for more expensive, mainstream and luxury products, and there is less incentive to bring true starter homes to the market. Over time, a divide emerges: fewer options for the next wave of first-time buyers who want new construction but don’t have the budget to go all-in on a forever home right out of the gate.”

Grimes predicts that if people truly live in the same home for most of their lives, there will be longer periods of residence and more difficult entry into the market for first-time buyers.

Redefining the American Dream

The report shows that almost three-quarters of respondents say owning a home remains a key life ambition, but most are in no rush to make a move: Only 14% of current renters plan to buy property within a year, down from 17% in 2025.

The majority of survey participants say they will wait for interest rates to drop before deciding to enter the market.

“The American dream of owning a home is still alive, even as the market presents challenges that require new financial strategies for many to achieve this dream,” said BMO’s Dilda. “When prices and rates are high, your best defense is a good defense: a smart budget and a financial partner who can assess your entire financial picture to help you secure the best terms within your means so you can get the keys.”

Because buyers expect to purchase a home only once, the majority of younger Americans value multi-functional properties. They are increasingly looking for homes that offer work space, rental options and the flexibility to accommodate multi-generational living.

Based on the index, more than two-thirds of Millennials and 75% of Generation Z homeowners say it was important to purchase a home that could house parents or grandparents as they grow older, while 60% of Generation Z and Millennials plan to invest in changes to their home to generate passive income, either through long-term tenants or short-term rentals.

What keeps buyers on the sidelines?

While interest in homeownership remains high, 55% of non-owners say buying seems out of reach in their lifetime, and this pessimism isn’t limited to low-income earners: Nearly half of renters under 40 who earn at least $100,000 a year say they are less confident they will ever own a home than they were five years ago.

According to the report, the top factors keeping potential homebuyers on the sidelines include high healthcare costs, a reluctance to dip into their retirement savings for a down payment, rising home insurance costs and climate risks.

Among young buyers grappling with affordability headwinds, the majority say they would embrace a long commute to their dream home, move to a more budget-friendly market if remote work allowed, and buy with friends or family.

In a sign of AI’s growing role in real estate, 72% of homebuyers say they will use the new technology to streamline the buying process, from learning about mortgage options and interest rates to calculating expenses and parsing legal and regulatory requirements.