The share of first-time homebuyers in the U.S. has plunged to its lowest level in over four decades, raising concerns about affordability, generational equity, and the future health of the housing market. With significantly fewer young buyers entering the market, housing analysts warn that the slowdown could ripple through related industries and stall long-term economic growth.
Decline in Buyer Participation
In 2024, first-time purchasers accounted for just 24% of all home sales, down sharply from roughly 32% just a year earlier, and from 50% in 2010, marking a troubling long-term trend. The share of first-time buyers had hovered near historic norms until mortgage rates surged and prices spiked following the pandemic. Now, with participation halved in less than two decades, the pattern represents a major shift in homeownership dynamics.
Fewer Homes Sold, Prices Still High
Last quarter, existing-home sales dropped by 7% compared to December 2024. New home purchase applications also declined by 4.5% year-over-year in May 2025. Meanwhile, inventory grew, with listings increasing 20–30% in several regions. But even with more homes on the market, sellers continue to reduce asking prices to capture diminishing demand .
Financial Barriers for Young Buyers
Rising home prices and elevated mortgage rates have priced many Millennials and Gen Zers out of the market. The median home purchase now requires an income of about $126,000 annually, nearly double the $79,300 threshold in 2021, making it unreachable for average first-time buyers .
Mortgage rates near 7% (more than 2.8 points higher than a decade ago) further compound the challenge, increasing monthly payments and limiting affordability.
Age of First-Time Buyers Rises
The median age for first-time buyers has climbed to 38, up from the late 20s in the 1980s and around 35 just a few years ago. The average age of all homebuyers is now 56, the highest since 1981. These older households include more equity-rich buyers, buyers trading up, or repeat buyers, while younger households increasingly stay on the sidelines.
Shifting Attitudes Among Gen Z
Younger generations show a clear preference for renting over buying. A recent survey revealed that 75% of Gen Z view renting as more financially sensible and freedom-enhancing than owning. Furthermore, 83% associate leasing with flexibility and experiential living, over traditional wealth-building.
Broader Economic Impacts
First-time buyers are key to the “housing chain,” initiating transactions that allow sellers to move, build, and invest. With fewer entry-level buyers, fewer seller-funded purchases occur, reducing construction activity, appliance and home improvement sales, and even insurance and real estate services. Economists warn this slowdown could pull down GDP growth, job creation, and household wealth accumulation.
Inventory Surge, Yet Inaction Continues
A rare flood of available homes hasn’t translated into buying activity. In Q1 2025, national home listings rose 27% year-over-year, even as existing sales dropped 7%. Nearly 75% of prospective buyers reported they’re waiting for prices and rates to decline before purchasing. Nearly half believe it’s currently a bad time to buy.
Affordability vs. Value
Adjusted for inflation, median asking prices dipped 2% in Q1 2025. However, mortgage payments remain out of reach for many: typical monthly housing costs use up 42% of a first-time homebuyer’s income, not the ideal benchmark of 28%.
Meanwhile, down payments are slightly lower in dollar terms, about $62,500, or roughly 15% of home price, suggesting market cooling but not a major relief in terms of affordability.
Regional Variation in Affordability
Certain markets, especially in the South, remain more accessible to first-timers. About six of the top 10 cities for affordability are in Florida, with many located across the broader South. In contrast, high-cost areas such as California remain out of reach for entry-level buyers.
Future Outlook
Correction, Not Collapse
Analysts describe the market as undergoing a “healthy correction” more than a crash. Forecasts call for modest price growth in the 1–3% range in 2025 and a slight dip in mortgage rates to around 6.4% by year-end, potentially reigniting first-time buyer activity.
Policy Implications
To restore balance and encourage younger buyers, advocates suggest:
-
Expanding down payment assistance and first-time buyer credits
-
Easing zoning and regulatory barriers to create more affordable housing stock
-
Monitoring mortgage rate trends and promoting financial literacy
Without intervention, the wealth-building gap between generations may continue to widen, with long-term societal consequences.
What This Means for Prospective Buyers and the Market
-
Aspiring homeowners: Monitor rates closely and boost savings for larger down payments. Consider affordability in secondary markets or entry-level homes.
-
Current homeowners: If you’re locked into a low-rate mortgage, selling now may not be attractive unless relocating or upsizing.
-
Builders and developers: Keep an eye on policy reforms and target developments that attract younger households.
-
Policymakers: Recognize the declining pipeline of first-time buyers as a threat to both economic mobility and macroeconomic growth.
Final Word
The steep decline in first-time homebuyer participation,down from half of all sales in 2010 to just one in four today, is more than a housing issue: it’s an economic and social wake-up call. Without meaningful efforts to restore affordability and access, the generational divide in wealth and homeownership may continue to deepen.
Let this trend serve as a wake-up to leaders, lenders, and families alike: if the next generation can’t access the keys to their first home, our national economy may face lasting consequences.
