More Young Americans Are Abandoning the Starter Home Idea
There's no sign that mortgage rates or home prices are going down anytime soon. And for younger potential homebuyers, the response is to play a waiting game and hold off on entering the housing market.
National Mortgage Professional, citing data from BMO Financial Group’s latest Real Financial Progress Index, found that a majority of Generation-Z and Millennial renters have given up on the idea of buying a starter home. They have a different plan: Wait for a long-term or “forever” home rather than buying small now and upgrading later.
Of those surveyed, 66% of Gen Zers and 61% of Millennials say they'd rather wait it out and save for longer than buy a starter home, especially because costs for these types of homes are also rising.
How do Americans feel about homeownership today?
Despite it still being a major life goal for two out of three Americans, sentiments around achieving homeownership have declined over the past five years, with 61% of Americans reportedly feeling less confident about the possibility of owning a home. And Gen Z and Millennials are feeling that drop in confidence most acutely.
What are the alternatives?
Many young people remain open to alternative housing options if it means fulfilling their dream of purchasing their forever home. For example:
- Fixer-uppers are a strong contender for many prospective young buyers, with 63% of Gen Zers and 65% of Millennials saying they'd buy a home that needs renovations.
- Moving out of state is another option: 56% of Gen Zers and 63% of Millennials say they would move to a different state, or even out of the U.S., if it meant they could afford to buy a home there.
- Co-buying is a possibility for some: 57% of Gen Z and 54% of Millennials say they would consider “co-buying” a home with friends or non-romantic partners.
Where does this leave young buyers?
“Many younger buyers feel like they missed their moment,” said Paul Dilda, head of U.S. consumer strategy at BMO. “But the dream is still alive." Find out more about the young homebuyer perspective at National Mortgage Professional.
Where do starter homes fit in today's market?
- The $1M Starter Home Is Becoming More Common: A look at just how challenging it is to afford a "starter home" in today's housing market
- Attainable Housing Options—Rethinking the Starter Home: Three rapidly emerging design and development trends are helping to make housing more attainable without sacrificing style or convenience