This Is What Today’s First-Time Home Buyers Are Looking For

• Smart home technology is the most popular must-have feature for first-time home buyers.
• More than one in four homeowners consider their starter home to be a forever home.
• Homeowners spent an average of 5 years in their first home, with millennials spending 4, Gen Xers spending 8 and baby boomers spending 9 years.

With the post-pandemic housing market still seeing high demand and ever-increasing prices, home buyer strategies and attitudes toward starter homes have changed. In the past, the motivations for buying and living in a starter home have been clear; starter homes tend to offer a way for first-time home buyers to get their foot in the door (no pun intended) of homeownership, usually with the understanding that they’ll one day be able to afford a home that better suits their needs and desires. But when prices are high, starter homes can, and often do, transition into forever homes.

To uncover both the modern perceptions and realities of starter homes, Rocket Homes^SM surveyed 1,170 U.S. residents, 997 of whom already own a home. Here’s what current and prospective homeowners are saying about their starter home budgets, timelines and top hopes and dreams.

Millennials Are Paying More For Starter Homes, On Average

The timeline of homeownership looks a little different to each generation – both with respect to the average age a person wants to buy their first home and the age at which they actually do. On average, non-homeowners in 2021 expected to pay $180,000 for their first home. But what does this imply about changes in the starter home market over the past few decades?

Millennials own the most expensive starter homes in the country. This group of 25- to 40-year-olds spent an average of $167,500 on their very first home, compared to baby boomers who spent just $85,000 on their starter home – roughly half the amount. That said, quite a bit of inflation has occurred in the years between baby boomers and millennials reaching home buying age. Assuming an average age difference of 40 years between baby boomers and millennials, an $85,000 home in 1981, adjusted purely for inflation, would cost more than $258,000 today, meaning baby boomers actually spent vastly more money on their starter homes.

Timelines for purchasing starter homes varied slightly by generation, but the length of time between when individuals wanted to buy a home to when they actually bought their first house did not. On average, generations were all looking at a timeline of 2.6 years longer for purchasing their first home than they originally anticipated. Baby boomers were the most off in estimating their purchasing timelines and waited an extra 4 years beyond their presumed plans – perhaps suggesting younger generations are learning from the home buyers before them.

While current homeowners reported inaccurately estimating their own home buying timeline, what about those who’ve yet to purchase their first home? When do they anticipate being able to buy?

Forty-four percent indicated home buying was not likely in their future. Younger generations in particular have been leaning away from home buying due to marrying later, their levels of student loan debt and a lack of financial resources. But for those more interested in buying a home, 43% reported that they expect to do so somewhere in their 20s or 30s.

Homeowners typically purchase a starter home with the intention of one day having enough cash or equity saved up to upgrade to a home that has more space and amenities or a better location. However, it’s important to not make the jump from starter to forever home too quickly – homeowners should plan to spend at least 3 – 5 years in their starter home to maximize return on investment and avoid losing money when they sell.

For homeowners today, the more money they spent on a starter home, the less time they spent living there, on average. Those who bought homes with a lower sale price ended up staying for as many as 10 or more years – perhaps an indication of a lack of financial flexibility.

Are Starter Homes Forever Homes?

Of the 72% of non-homeowners who plan their first home to be a starter, nearly 1 in 5 expect to remain there for at least 16 years.

Of the respondents, most are still beginning with a starter home and transitioning into a different forever home. For nearly three-fourths of participants, a first-home purchase was not a forever-home purchase. Moreover, more than a third of participants who had not yet purchased their first home anticipated living there for less than 5 years.

When asked about reasons to consider a starter home, potential homeowners most commonly believed it would help them ease into homeownership (42%). While starter homes certainly can make homeownership more accessible to those with smaller budgets, it’s important to understand the risks that come with them.

For 35% of respondents, buying a forever home right away simply was not an affordable option. For more than a third of respondents, however, a starter home was simply an opportunity to try out a new location.

What Are First-Time Home Buyers Looking For?

The most important features for potential home buyers were smart-home technology, kitchen island, and a designated home office.

Though starter home buyers typically have to make some compromises in their home search, many of the top features they’re looking for are actually fairly common, even in lower-priced homes. Smart home tech like smart doorbells and thermostats have become extremely popular and relatively affordable. In fact, 39% of homeowners surveyed already owned smart home tech. Other features on the wish list were hardwood floors (26%) or a kitchen island (26%) followed by an open floor plan (25%) and a master bedroom with a walk-in closet (23%).

When looking at the different generations, these were the most desired starter home features:

Millennials

• Garden
• Smart home technology
• Primary bedroom with walk-in closet

Gen X

• Garden
• Hardwood floors
• Kitchen island

Baby Boomers

• Open floor plan
• Kitchen island
• Hardwood floors

Some Homeowners Believe Non-Homeowners Should Wait To Buy A Starter Home

When it comes to buying a new home, an important consideration is whether spending less money on a home in need of renovations is preferable to buying a move-in ready home that puts them over their budget. Sixty percent of future homeowners preferred making their own renovations, which can give them the ability to upgrade their home to their liking.

Current homeowners agree this is a good strategy, with 80% recommending their non-homeowning friends hold off on buying a forever home when making their first purchase.

When it comes to selling their homes, millennials were the most confident that they’d make a good profit, with 88% believing they’d receive a high offer. While baby boomers were less confident in their selling price, an impressive 82% believed they’ll get top dollar if they decide to sell.

Moving Forward

In spite of price challenges, homeowners and first-time home buyers today are following in the footsteps of the generations of homeowners that came before them: buy a starter home first, then work up to one day owning that dream house or forever home.

While start home home buyers initially anticipated living in their first home for only a few years, in reality, first-time homeowners stayed in their starter home for much longer than expected and had no regrets. Their parting advice was largely to do as they did: purchase a starter home first.

Methodology and Limitations

This study uses data from a survey of 1,170 Americans located in the U.S. 997 of these were current homeowners, while 173 were prospective homeowners. Survey respondents were gathered through the Amazon Mechanical Turk survey platform where they were presented with a series of questions, including attention-check and disqualification questions.

By gender, 55.4% of respondents identified as men, while 44.6% identified as women. Respondents ranged in age from 18 to 70 years old with an average age of 34. 13.4% of respondents were Gen Zers, 34.2% were millennials, 34.1% were Gen Xers and 18.3% were baby boomers. Participants who incorrectly answered an attention-check question had their answers disqualified. Outliers were removed where the perceived amounts needed to retire and monthly contributions were questioned. This study has a 3% margin of error on a 95% confidence interval.

Please note that survey responses are self-reported and are subject to issues, such as exaggeration, recency bias and telescoping.