First-Time Buyers Vanish as Rentals Dominate the U.S. Housing Market

The U.S. housing market continues to challenge new buyers, as rising costs and high mortgage rates make homeownership less attainable. Instead, the rental market is booming—and this shift is changing the real estate landscape for investors and renters alike.

Key Takeaways

• First-time home buyers dropped to just 1.1 million in 2024—nearly half the historical average.
• Starter home sales and new construction are slowing sharply.
• The rental population has surged to a record 46 million households.
• Only 6 million renters can afford a median-priced home under current mortgage conditions.
• Investors may find unique opportunities in the growing rental demand and constrained entry-level housing supply.

Investment Properties: Browse Turnkey Rental Properties For Sale in Our Online Portal

The Collapse of First-Time Buyer Activity

According to the National Association of Realtors, only 1.1 million first-time home buyers entered the market last year. That’s 380,000 fewer than in 2023 and far below the historical average of around 2 million. The Wall Street Journal suggests 2025 could be even worse.

Sales volume is shrinking especially in homes priced under $500,000—the range typically targeted by new buyers. Builders, too, are reacting. New home sales declined 6% year-over-year in May 2025.

Why the Rental Market Is Booming

The number of renter households in the U.S. has hit a record 46 million, as more Americans are priced out of the housing market. According to the Harvard Joint Center for Housing Studies, a household needs to earn $127,000 to afford a median-priced home today. Just a few years ago, that figure was $79,000.

Only 6 million of the 46 million renters meet that income threshold. Without mortgage rate relief or significant price drops, homeownership will remain elusive for many—especially Gen Z and Millennials.

Related: The 7 Best U.S. Real Estate Markets to Buy Rental Properties in 2025

Investor Implications: Opportunity in Rental Demand

While first-time buyers vanish, rental demand is rising fast. Investors who focus on turnkey rentals in affordable metros may find excellent long-term growth opportunities.

• Single-family rentals in the $150K–$250K range are in high demand.
• Markets like Cleveland, Kansas City, and Buffalo offer high rental yields and strong tenant demand.
• Longer-term tenants are likely as buyers delay purchasing homes.

Investors should watch for:

• Continued starter home construction declines
• Rental affordability pressures driving demand for mid-tier properties
• Slower price growth in entry-level markets

Related: Investing in Cleveland Real Estate: Everything You Need to Know

Conclusion

First-time buyers are quickly disappearing from the U.S. housing market, as affordability continues to deteriorate. But while this is bad news for aspiring homeowners, it presents a growing opportunity for real estate investors.

With more renters in the market than ever before, strategic investments in affordable rental housing could deliver both strong cash flow and long-term appreciation—especially if mortgage rates remain elevated through 2025.

Previous Article: Will Lower Mortgage Rates Spark a Housing Market Recovery?