The Vanishing First-Time Buyer: How a Shifting Market is Reshaping Real-Estate Investment

First-time buyers made up only 21 percent of all home purchases between July 2024 and June 2025, the lowest share since tracking began in 1981. The typical first-time buyer’s age also climbed to 40, underscoring how affordability pressures and lifestyle shifts are pushing ownership further out of reach (NAR, 2025).

Meanwhile, mortgage costs remain well above pre-pandemic levels. The average 30-year fixed rate hovered around 6.23 percent in late November 2025 (Freddie Mac, 2025). With monthly payments rising faster than wages in many metros, homeownership feels increasingly unattainable for younger and mid-income households.

As a result, many potential buyers are renting longer. The rental vacancy rate stood near 7 percent in Q2 2025 (U.S. Census Bureau, 2025), while Zillow reported that rent growth cooled to about 2.4 percent year-over-year, with the typical U.S. rent around $2,007.

Ripple effect 1: Demand for single-family rentals and build-to-rent

Households delaying ownership still crave space, privacy, and backyards, creating sustained demand for single-family rentals and the growing build-to-rent segment.

• Roughly 64,000 build-to-rent homes were under construction as of mid-2025, concentrated in the South and metros like Phoenix, Dallas, and Atlanta (RealPage Analytics, 2025).

• Investor purchase share has cooled but remains meaningful. In the second quarter of 2025, investors bought about 16 percent of single-family homes that sold (Redfin, 2025).

Investor takeaway: Fewer first-time buyers mean a larger pool of long-term renters. Build-to-rent properties and well-located single-family homes can deliver steady yields, especially in metros with strong job growth and limited new supply.

Ripple effect 2: Entry-level for-sale supply remains tight

It is tempting to assume fewer first-timers will push entry-level prices down. The reality is more nuanced.

• Builders did shift toward smaller homes and townhomes as affordability tightened. NAHB notes the median new-home size fell to about 2,150 square feet in 2024, and townhomes climbed to a record 17 percent of the single-family market. That helps, but not enough to fully restore starter-home availability (NAHB, 2025).

• Multifamily deliveries are high, with more than 500,000 new apartments expected to come online by the end of 2025. That adds rental options and can temper rent spikes, but it does not directly expand entry-level for-sale stock (Multifamily Dive, 2025).

  
  

Net effect: Entry-level resale inventory remains constrained, so broad downward pressure on starter-home prices is limited. Many buyers simply pause or pivot to renting, which feeds single-family and townhome rental demand instead of forcing significant price declines.

Ripple effect 3: Condos become a value lane, but with caveats

If first-time buyers step back from single-family homes, some gravitate to condos and townhomes where the ticket price and monthly payment can be lower. The condo market in 2025 has become more buyer friendly.

Redfin reported there were about 72 percent more condo sellers than buyers nationwide in early fall 2025, creating the strongest condo buyer’s market in years and leading to softer pricing relative to single-family homes (Redfin, 2025).

Investor takeaway: Condos can pencil for rental yield if HOA fees and special assessment risks are well underwritten. In markets with rising urban employment and transit access, selectively acquiring discounted condos can create durable cash flow, but diligent HOA review is essential.

What this means for buy-to-rent investors right now

1. Lean into family-sized rentals in job-growth corridors. Target submarkets where schools, commutes, and space matter, especially in metros with strong in-migration. Build-to-rent and scattered single-family rentals should benefit as more households rent longer before buying.

2. Focus on rent-to-price balance, not just cap rate snapshots. With mortgage rates near the low sixes and rents cooling, stress test acquisitions using conservative rent growth and realistic turnover costs. Keep an eye on local rental vacancy trends and incoming multifamily supply to avoid near-term rent softness.

3. Use townhomes as a bridge product. Townhomes often rent at a premium to garden apartments but at a discount to detached single family residential. Builders are producing more of them, which creates acquisition opportunities for lease-up or stabilized holds.

4. Be selective on condos. Where inventories are heavy and sellers are flexible, condos can work as mid-priced rentals. Underwrite HOA health, reserve studies, insurance trends, and any looming assessments before you assume a rosy yield.

5. Watch rate moves for exit timing. If rates drift lower, some renters will shift back toward buying, which may lift entry-level resale volumes. Plan debt maturities and refinance options with that timing in mind.

Market signals to monitor through 2026

• First-time buyer share and age in NAR’s annual profile, which directly track the ownership pipeline.

• Rental vacancy rate and median asking rent in the Census HVS, which steer rent growth assumptions.

• Mortgage rate trend in Freddie Mac’s PMMS, which shapes purchase power and potential renter-to-owner migration.

• Investor purchase share and property-type mix in Redfin’s investor reports, which reveal where capital is crowding in.

• Build-to-rent pipeline from RealPage and sector trackers, which influences future single-family rental supply.

With first-time buyers at a record low share, the market has quietly tipped a bit more toward renting as a stepping stone rather than a brief pit stop. That shift does not automatically crash entry-level prices, because resale supply remains thin. It does, however, create a wider and more durable renter base for single-family rentals, townhomes, and selective condos. Investors who underwrite carefully, choose submarkets with steady jobs and schools, and respect supply pipelines are set up to capture this demand while protecting downside risk.

Seeing first-time buyers step back while rental demand deepens is reshaping how smart investors deploy capital. If you are weighing a single-family rental, townhome, or condo, let’s look at your market, budget, and time horizon together. Schedule a strategy session with us and we can build a simple, data-backed plan that stress tests rents, expenses, and financing so you can move forward with clarity.