Why is Buying Your First Home in the United States So Difficult in 2025?

Buying your first home in the United States in 2025 has become increasingly complicated, with the lack of affordable housing being a key factor. In 2023, only 9% of newly built homes were small, under 130 square meters, a significant drop from the 40% recorded in 1982. This situation is mainly affecting first-time homebuyers, who are facing great difficulty entering the real estate market.

Why have small homes disappeared?

Starter homes, the more affordable and smaller properties, have become scarce for several reasons. First, zoning regulations have increased construction costs. These regulations limit what can be built in certain areas, making it harder for builders to create cheaper homes. Sam Khater, Chief Economist at Freddie Mac, explains that

“Builders simply cannot create affordable homes due to rising costs or regulations.”

Increase in construction costs in 2025

The cost of building a home has risen significantly in the last decade. According to Selma Hepp, Chief Economist at CoreLogic, labor and material costs have increased by 50%, while the price of land has multiplied by 2.5. These increases have made it difficult for builders to focus on smaller, more affordable homes, worsening the situation for first-time buyers.

Impact of mortgage rates and high prices

Mortgage interest rates, which are currently around 7%, are also complicating things. First-time buyers can no longer afford many homes due to the high prices. Between 2020 and 2024, home prices increased by more than 52%, which has made many homes out of reach for buyers with low and middle incomes. Additionally, many current homeowners prefer to stay in their homes because they have low mortgage rates, which has led to fewer homes being available for sale.

Profile of today’s first-time buyer

The profile of first-time buyers has changed significantly in recent years. In 2024, the average age of these buyers was 38 years, much higher than the 29 years recorded in 1981. According to Jessica Lautz, Economist at the National Association of Realtors (NAR), the current market has a record number of cash buyers, which makes the competition even harder for those relying on mortgage financing.

This shift reflects the difficulty many Americans face in raising the money needed to buy a home, especially when prices are high and financing conditions are stricter. The dream of homeownership is becoming more distant for many.