Buying your first home used to be a rite of passage — the ultimate American dream.
It was once a proud milestone for newlyweds, young professionals and growing families. But in 2025, buying a starter home now comes with a jaw-dropping price tag.
The average entry-level house in 233 cities across the US is now $1 million, according to a new report from Zillow.
That’s nearly three times the average from just five years ago.
The figures paint a stark picture of an American housing market in crisis, one in which first-time buyers are being squeezed out from every angle, as mortgage rates stick above six percent and the price of maintaining a home soars.
The starter home was once a no-frills, two or three-bedroom property that gave younger buyers a foothold to build equity.
But now, a perfect storm of economic troubles has caused the death of the starter home, reshaping the market beyond recognition.
And the affordable end of the housing market, according to experts, is being ‘squeezed from every side.’
For one, land and labor costs have exploded, pushing builders toward developing larger, higher-priced homes, and many new zoning laws and development restrictions have also made it difficult to construct smaller, more affordable units.
Meanwhile, supply chain disruptions and tariffs on building materials have contributed to skyrocketing construction costs, and investors have dominated the housing market, crowding out traditional buyers and snapping up lower-end properties to turn into rentals.
Demographic shifts, especially millennials entering peak buying years, have also intensified competition.
The disappearance of affordable homes has become central to the American housing crisis – and is hitting first-time buyers the hardest.
There are now roughly three million potential first-time buyers that are stuck on the sidelines, blocked by low inventory, high prices and mortgage rates that refuse to budge.
Jessica Lautz, deputy chief economist at the National Association of Realtors, summed up the problem: ‘It is such an unusual market because we have an all-time low of first-time home buyers, but an all-time high of all-cash buyers.’
With homeowners who are locked into ultra-low pandemic-era mortgage rates, few are willing to sell, causing a chokehold that has kept prices climbing and competition fierce.
Across the country, older starter homes are also being demolished, remodeled or replaced with larger, more expensive properties. Now, it’s become a market in which small, simple homes have become virtually extinct.
With first-time buyers averaging 40 years old and the typical US homebuyer hitting an unprecedented 59, luxury agents say the shift is likely to stay.
Miami real estate agent Chris Wands, one of Douglas Elliman’s top producers with $1 billion in career sales, sees it happening in real time.
‘Buyers are approaching homeownership much more strategically than in previous years,’ he told the Daily Mail.
‘In the past, we saw a lot more of the “buy just to buy” crowd, because the reality is that it was simply more affordable.
‘Now, people are renting longer, saving longer and skipping the traditional starter home altogether. And when they finally purchase, it’s often a larger, more expensive property that they plan to stay in for a decade or more.’
NAR data backs him up. First-time buyers now make up just 21 percent of the market, the lowest since tracking began in 1981.
‘Affordability pressures are a huge factor, but so is liquidity,’ Wands said.
‘With mortgage rates still relatively high and the stock market performing well, many buyers would rather keep their cash invested and rent in the meantime.
‘In major metros like Miami or New York, and depending on what buyers are looking for, it may cost less to rent than to own right now.’
According to Wands, another contributing factor are life stages, which he said ‘have notably shifted as life expectancy has gone up.’
‘People are getting married and having kids later, so the timeline for buying a home has naturally moved back,’ he said.
‘At the same time, Boomers are holding onto homes longer or purchasing second properties, which limits supply and pushes younger buyers further out of the market.
‘In short, the typical buyer today is older, more deliberate, and more financially sophisticated. More importantly, they’re waiting to buy the right home — not just any home.’
Boca Raton agent Aaron Buchbinder points to Boomers as a major force behind the shrinking starter home supply, as many are aging in place and have rock-bottom mortgages.
‘The rising median age of homebuyers is a direct reflection of the affordability and inventory crisis gripping the market,’ he told the Daily Mail.
‘Boomers hold a substantial share of the nation’s housing, and their decision to age in place, combined with pandemic-era mortgage rates that discourage selling, has created a significant bottleneck.
‘Many older homeowners are reluctant to give up low property taxes or sub-three percent mortgage rates, so they’re staying put rather than downsizing.
‘This limits supply for younger buyers, keeps prices elevated, and pushes the average age of first-time homeowners ever higher.
‘Even those who already own a starter home face challenges moving up, the equity they’ve gained often isn’t enough to bridge the gap to a larger property.’
