First-Time Home Buyers Fall to Record Low Amid Rising Costs and Tight Supply

Historic Decline in Entry-Level Buyers

First-time home buyers accounted for just 21 percent of all U.S. home purchases over the past year — the lowest share since the National Association of Realtors (NAR) began tracking the data in 1981. The figure marks a drop from 24 percent the previous year, highlighting the growing struggle of younger Americans to enter the housing market.

The NAR report paints a stark picture of a market increasingly dominated by older, wealthier generations. Baby boomers, born between 1946 and 1964, remained the largest group of buyers, representing 42 percent of the total — unchanged from the year before. Many in this cohort command significant home equity and accumulated wealth, allowing them to purchase new properties outright or leverage existing assets in ways younger buyers simply cannot.

A Generational Divide in Homeownership

The housing market’s demographic imbalance underscores the widening gap between established homeowners and younger would-be buyers. Younger millennials — those born between 1990 and 1998 — made up 60 percent of first-time buyers this year, down sharply from 71 percent a year earlier. Their older millennial counterparts, born between 1980 and 1989, not only earned the highest median household incomes among buyers — about $133,000 — but also purchased the largest homes, with a median size of 2,100 square feet.

NAR deputy chief economist Jessica Lautz said the trends reflect broader life-cycle shifts. “We’re seeing older millennials move further into middle age,” Lautz noted. “They’re more likely to have children, to need more space, and to prioritize long-term stability.” Yet even among this relatively affluent group, homeownership remains a costly and competitive pursuit.

The Economic Backdrop: Affordability and Inventory Pressures

For many Americans, the dream of homeownership is slipping further out of reach. The housing market’s current state is the result of several intertwined economic forces: elevated mortgage rates, constrained housing supply, and soaring home prices that continue to outpace wage growth in most regions.

While mortgage rates have eased slightly from the 7.8 percent peaks of late 2023, they remain around double the historic lows seen just a few years ago. At the same time, tight inventory continues to push prices upward, particularly in high-demand metropolitan areas like San Francisco, Austin, and Boston. Even smaller, traditionally affordable markets — such as Indianapolis or Tampa — have seen double-digit price appreciation over the past three years.

According to economists, these conditions form a “lock-in effect”: existing homeowners are less likely to sell because doing so would mean giving up ultra-low mortgage rates secured before 2022. As a result, fewer homes enter the market, limiting options for newcomers and keeping competition intense.

Baby Boomers Retain Dominance Through Home Equity

Baby boomers’ dominance in the housing market is hardly new, but their continued purchasing power reveals important structural realities about wealth distribution in America. Many in this generation bought homes decades ago when prices were far lower and have since benefited from enormous appreciation in property values. That equity acts as both a cushion and a gateway to new real estate opportunities.

A separate Redfin analysis found that empty-nest baby boomers now own more than one-quarter of the nation’s largest homes — those with three or more bedrooms. In stark contrast, younger generations control only about 16 percent of these larger properties. This imbalance has deep implications for housing availability: even as older owners downsize more slowly than expected, younger households are waiting longer to have children and delaying moves to larger homes.

“Boomers are aging in place for longer than prior generations,” said housing analyst Jordan Levine. “That keeps a significant slice of the housing stock off the market, especially family-sized homes in desirable neighborhoods.”

Regional Disparities: Where the Market Diverges Most

Housing affordability varies dramatically across U.S. regions. The South remains the nation’s most active housing market, propelled by steady population growth in states like Texas, Florida, and North Carolina. However, even there, price gains have accelerated faster than income growth, eroding prior affordability advantages.

In the Midwest, particularly in cities such as Cleveland, Kansas City, and Minneapolis, homes remain relatively attainable compared to coastal markets. First-time buyers represented a larger share in these regions, though still below long-term averages. For many young families, relocating to the Midwest or the Sun Belt is becoming the only viable path to homeownership — though rising insurance premiums, property taxes, and infrastructure costs are slowly narrowing that advantage.

On the West Coast, affordability remains the greatest challenge. Median home prices in California now exceed $850,000, and down payments often surpass what a typical millennial household earns in an entire year. The situation is similar in parts of the Northeast, where limited space for new construction and strict zoning laws have constrained housing supply for decades.

The Role of Income, Debt, and Lending Standards

The affordability struggle isn’t just about home prices. Persistent student loan obligations, slower wage growth, and tougher lending criteria add further obstacles for younger buyers. After years of historically easy credit, lenders have tightened standards again, prioritizing borrowers with high credit scores and strong down payments — an area where many first-time buyers fall short.

The resumption of federal student loan payments in late 2023 also placed new pressures on younger households. With average student debt nearing $30,000 per borrower, many potential buyers find it difficult to qualify for mortgages or save enough for a down payment. According to the University of the People’s president, Shai Reshef, “High debt burdens combined with today’s high housing costs are forcing many young adults to delay major financial milestones like homeownership or starting families.”

Long-Term Implications for the Housing Market

The record-low share of first-time buyers raises concerns about the long-term health and inclusiveness of the U.S. housing market. Homeownership has long served as a cornerstone of wealth-building and community stability. If fewer young families can buy homes, the effects could reverberate across generations — widening economic inequality and reducing mobility.

Historically, first-time buyers have represented between 30 and 40 percent of the housing market. Even during the financial crisis of 2008–2009, their share averaged about 35 percent as home prices fell and federal programs encouraged buying. The current 21 percent figure suggests that affordability challenges now outweigh even past recessionary shocks.

In addition, fewer new homeowners may have ripple effects on related sectors such as home construction, renovation, and consumer goods. Builders have already begun shifting toward smaller, more affordable projects, particularly in suburban developments. However, high material and labor costs continue to limit the supply of new starter homes nationwide.

Comparing Today’s Market with Historical Patterns

When NAR first began collecting buyer demographics in 1981, the typical first-time buyer was 29 years old, and a starter home cost roughly three times the buyer’s annual income. Today, the median first-time buyer is about 35 years old, and the cost of an entry-level home hovers around five to six times household income — a level unseen for most of the postwar period.

These trends mirror those seen in other advanced economies, especially in Canada, the United Kingdom, and Australia, where younger generations face similarly steep housing affordability barriers. In each case, rapid price appreciation, limited supply, and entrenched generational wealth gaps have produced structurally constrained housing markets.

What May Come Next

Economists generally expect modest improvements later in the year as more existing homes hit the market and mortgage rates gradually decline. Yet even with a potential easing in borrowing costs, fundamental supply shortages and demographic pressures will likely keep prices elevated.

If current patterns persist, the U.S. could face a generational homeownership gap not seen in modern history — with consequences for family formation, savings rates, and long-term economic mobility. Addressing these issues will require a sustained focus on increasing housing supply, reforming zoning and permitting laws, and expanding access to credit for first-time buyers.

For now, the story is clear: baby boomers remain the undisputed power players of U.S. real estate, while millions of younger Americans continue to watch from the sidelines — waiting, saving, and hoping for their chance to buy a place of their own.