First-time homebuyer share hits 24% in 2025, lowest since 1981, signalling major market shift

The housing market in 2025 continues to grapple with a striking trend: the proportion of first-time homebuyers has dwindled to levels not seen since 1981, signalling profound shifts in accessibility, affordability, and demographic participation. This decline, hovering at around 24% of total home purchases according to recent industry reports, underscores a market increasingly dominated by repeat buyers, investors, and those with established financial footing. As economic pressures mount, from elevated mortgage rates to soaring property values, this erosion raises questions about long-term housing dynamics, generational wealth transfer, and the broader implications for consumer spending and economic growth.

Historical Context and Current Realities

Back in 1981, first-time buyers accounted for approximately 44% of home purchases, a figure that reflected a more accessible market buoyed by different economic conditions. Mortgage rates, while high at times—peaking around 18% that year—were offset by lower home prices relative to incomes, allowing younger households to enter the fray. Fast-forward to 2025, and the landscape has transformed. Data from the National Association of Realtors (NAR) indicates that first-time buyers now represent just 24% of the market, down from 32% in 2023 and marking the lowest share since records began in 1981.

This contraction is not isolated. The average age of a first-time buyer has climbed to a record 38 years in 2024, up from 29 in 1981, as reported in various housing analyses. Young Americans, particularly those under 35, are delaying homeownership due to a confluence of factors: student debt burdens, stagnant wage growth in entry-level positions, and home prices that have outpaced inflation. In markets like Ontario, Canada, data from recent years show that solo first-time condo buyers aged 30 and younger make up about 41.5% of purchases over the past five years, yet this subgroup is shrinking amid broader affordability challenges.

Experts point to persistent high mortgage rates—averaging around 7% in mid-2025—as a key barrier. While rates have eased slightly from their 2023 peaks, they remain elevated compared to the sub-3% environment of the early 2020s. Combined with median home prices exceeding $400,000 in many U.S. regions, the monthly payment calculus has become prohibitive for many aspiring buyers. A Forbes Advisor analysis from August 2025 predicts that home prices may decline in some overvalued markets but rise in others, creating a patchwork of opportunities that favours those with cash reserves or equity from prior sales.

Factors Driving the Decline

Several interconnected elements contribute to this downturn in first-time buyer participation:

• Affordability Crunch: Housing costs as a share of median income have surged. In 1981, the median home price was about $70,000, equivalent to roughly $240,000 in today’s dollars after inflation adjustment. By contrast, 2025 sees averages closer to $850,000 in high-demand areas, with interest payments amplifying the strain.
• Inventory Shortages: A chronic lack of starter homes persists, exacerbated by underbuilding since the 2008 financial crisis. Builders have focused on higher-end properties, leaving entry-level options scarce.
• Demographic Shifts: Millennials and Gen Z face unique hurdles, including delayed life milestones like marriage and family formation, which traditionally correlate with home purchases. The Guardian’s July 2025 report highlights how young Americans are holding off, pushing the average buyer age higher.
• Investor Dominance: Institutional investors and repeat buyers, including those leveraging home equity lines, have captured a larger market slice, crowding out novices.

These trends are not uniform globally. In New Zealand, first-home buyers have recently held one of their strongest positions in 20 years, capturing a higher market share amid policy tweaks like relaxed lending rules, as noted in August 2025 reports from NZ City. This contrast suggests that targeted interventions—such as down payment assistance or rate subsidies—could reverse declines elsewhere.

Economic Implications and Market Sentiment

The waning presence of first-time buyers carries ripple effects across the economy. Homeownership has long been a cornerstone of wealth building, with each purchase injecting capital into local economies through renovations, furnishings, and services. A DXD Capital blog from August 2025 estimates that the age shift—from 28 in 1991 to 38 today—has resulted in roughly 7 million fewer home sales over recent decades, fuelling a boom in single-family rentals and altering consumption patterns.

From an investor perspective, this trend bolsters sentiment towards real estate investment trusts (REITs) and rental-focused assets, as demand for alternatives to ownership grows. Analyst sentiment, as gauged by NAR’s deputy chief economist Jessica Lautz in mid-2025 statements, describes the market as a “seller’s housing market” with first-time buyer ratios at 41-year lows, implying sustained price pressures in supply-constrained areas.

Broader economic forecasts paint a mixed picture. Ramsey Solutions’ August 2025 housing outlook anticipates modest inventory growth in 2026, potentially easing entry for first-timers if rates dip below 6%. However, models from HousingWire suggest that without significant wage inflation or policy relief, the share could stagnate or fall further, exacerbating inequality. Credible sources like Business Insider in June 2025 note a stalemate between buyers and sellers, with high prices and rates keeping newcomers sidelined.

Potential Pathways Forward

Looking ahead, analyst-led forecasts indicate a gradual rebound if certain conditions align. For instance, a model from The Mortgage Reports’ July 2025 survey emphasizes flexibility as a “home buying hack,” with successful first-timers often compromising on location or property type. Projections suggest that by 2027, first-time buyer shares could recover to 30% if mortgage rates average 5.5% and inventory rises by 15%, based on NAR’s generational trends data from April 2025.

Government interventions could accelerate this. Programs offering interest rate buydowns or tax incentives for young buyers have shown promise in pilot markets. Yet, risks remain: persistent inflation or a recession could deepen the divide, pushing more towards perpetual renting.

Investor Considerations

For investors, this decline illuminates opportunities in undervalued segments. Markets with emerging affordability—such as declining-price regions highlighted in Forbes’ 2025 predictions—may attract a resurgence of first-timers. Conversely, luxury and rental sectors stand to benefit from the status quo. Dry humour aside, one might say the housing ladder has turned into an escalator moving upwards, accessible only to those already on higher floors—but data-driven strategies can navigate this terrain.

In summary, the plummeting share of first-time homebuyers since 1981 reflects a market in flux, with profound implications for economic vitality. While challenges abound, targeted reforms and market adjustments could restore balance, ensuring homeownership remains a viable path for future generations.

References

• Business Insider. (2025, June). Home prices, mortgage rates, and first-time buyer trends. https://www.businessinsider.com/home-prices-mortgage-rates-first-time-buyers-torsten-slok-apollo-2025-6
• DXD Capital. (2025, August). Single-family rental trends and homebuyer age shifts. https://x.com/unusual_whales/status/1681315638722318343
• Forbes Advisor. (2025, August). Housing market predictions. https://www.forbes.com/advisor/mortgages/real-estate/housing-market-predictions/
• Good Returns. (2025). First-home buyers’ share in New Zealand market. https://www.goodreturns.co.nz/article/976524792/market-share-high-for-first-home-buyers.html
• HousingWire. (2025). The 2025 housing market for first-time homebuyers. https://www.housingwire.com/articles/the-2025-housing-market-for-first-time-homebuyers/
• NAR. (2025, April). Generational trends in home buying and selling. https://www.nar.realtor/sites/default/files/2025-04/2025-home-buyers-and-sellers-generational-trends-04-01-2025.pdf
• NAR. (2025). Highlights from the Profile of Home Buyers and Sellers. https://www.nar.realtor/research-and-statistics/research-reports/highlights-from-the-profile-of-home-buyers-and-sellers
• NZ City. (2025, August). First-home buyers stronger than ever. https://home.nzcity.co.nz/news/article.aspx?id=428654
• Ramsey Solutions. (2025, August). Housing market forecast. https://www.ramseysolutions.com/real-estate/housing-market-forecast
• Reporter Herald. (2025, July 11). First-time homebuyers: fewer and older than ever. https://reporterherald.com/2025/07/11/first-time-homebuyers-fewer-and-older-than-ever-before
• The Globe and Mail. (2025). Ontario first-time buyer share analysis. https://www.theglobeandmail.com/business/article-young-first-time-home-buyers-large-share-ontario-purchases/
• The Guardian. (2025, July 13). First-time US homebuyers reach generational low. https://www.theguardian.com/society/ng-interactive/2025/jul/13/first-time-us-homebuyers-low
• The Mortgage Reports. (2025, July). First-time home buyer survey report. https://themortgagereports.com/121745/first-time-home-buyer-survey-report-2025
• The Mortgage Reports. (2025, July). First-time homebuyer strategies. https://themortgagereports.com/121703/first-time-home-buyer-survey-2025-2
• Yahoo Finance. (2025). Is it a good time to buy a house? https://finance.yahoo.com/personal-finance/mortgages/article/is-it-a-good-time-to-buy-a-house-202100449.html