First-Time Homebuyers Face Tough Market – What It Means for Builders
- Neil Caron
- May 15
- 3 min read
For many aspiring homeowners, the dream of purchasing a first home in 2025 is feeling more elusive than ever. Despite some home builders offering discounted mortgage rates to attract new buyers, the market remains challenging for those looking to step onto the property ladder.
Why First-Time Buyers Are Struggling According to industry experts, first-time buyers are now, on average, 38 years old – a decade older than historical norms. The rising age of first-time buyers reflects the growing difficulty of saving for a down payment and securing affordable financing. The median household income for these buyers has soared to $97,000, and many are putting down just 9% – a number significantly lower than the conventional 20% down payment often recommended.
Meanwhile, builders like D.R. Horton and Lennar are offering mortgages as low as 5% to entice first-time buyers. While that may sound attractive compared to the average 30-year fixed rate of 6.79%, the incentives aren’t proving as effective as hoped. In the first quarter of 2025, PulteGroup reported an 11% decline in new orders from first-time buyers, highlighting that even discounted rates aren’t enough to offset the affordability crisis.
🐷 RSL Piggy Points:
First-time buyers are now 38 years old on average – a decade older than historical norms.
Builders are offering mortgage rates as low as 5% to entice first-time buyers.
FHA loan delinquency rates hit 11% in Q1 2025, the highest since 2013.
Incentives for first-time buyers have increased to 8% of the home’s purchase price.
Two Distinct First-Time Buyer Groups
Today’s housing market has split first-time buyers into two groups: those who can afford to purchase an existing home and those relying on new homebuilders’ mortgage incentives to secure a property. Builders have seen a rise in first-time buyer transactions, with the National Association of Home Builders noting that 40% of new home sales in 2024 were to first-time buyers – 15% higher than the pre-pandemic average.
However, many of these buyers are overextending themselves financially. Mortgage Bankers Association data reveals that the delinquency rate on FHA loans, which are popular among first-time buyers due to their lower down payment requirements, hit 11% in the first quarter – the highest level since 2013.
Builder Incentives Are Increasing
Neil Caron, Area Manager at CMG Mortgage, weighs in: "The pressure on builders to offer bigger incentives is mounting. With first-time buyers feeling squeezed by high prices and interest rates, the industry is caught between maintaining profitability and attracting financially stretched buyers."
As builders struggle to shift inventory, the incentives are getting bigger. Data from John Burns Research & Consulting shows that builders offered incentives equivalent to 8% of a home’s purchase price in the first two weeks of April – up from 7.2% in January. These deals are cutting into profit margins, especially as builders also grapple with higher construction costs.
🏁 RSL Perspective: "Builders are walking a tightrope – balancing the need to attract financially strained first-time buyers while protecting profit margins," says ReadySetLoan. "With incentives climbing and first-time buyer demand cooling, the starter home market may face continued challenges in the coming months."
The Future of the First-Time Buyer Market
"The key to attracting first-time buyers isn’t just lower rates – it’s lowering the overall cost of entry," says Neil Caron. "Until prices align with wage growth, we’re likely to see builders continue offering incentives as a short-term solution."
While some builders remain hopeful that a dip in mortgage rates could revive demand, the reality is that for young buyers, price reductions may be the key to affordability. Until home prices align more closely with wage growth, the starter home market will likely remain sluggish – leaving builders caught between rising costs and the need to attract financially stretched first-time buyers.
For more expert insights on navigating today’s complex housing market, visit ReadySetLoan and discover how our educational resources can help you make smarter homebuying decisions.
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