First-Time Home Buyer Affordability Report – Q1 2025

Buying a home is no walk in the park— and in today’s market, it’s especially challenging for first-time buyers.

Although inflation-adjusted list prices decreased slightly in the first quarter of 2025, interest rates rose. For the vast majority of first-time home buyers who depend on a loan for their home purchase, this meant little relief in the way of affordability in the first months of the year.

List prices dip slightly

Across the nation, inflation-adjusted list prices in the first quarter fell slightly (-2%) compared with the last quarter of 2024. Looking at adjusted prices tells us that buyers’ money could go a bit further toward the sticker price on their home.

But the number of homes changing hands remains historically low, according to data from the National Association of Realtors. Some of this may be seasonal — home sales are typically lackluster in the first quarter of the year. But high prices, high mortgage rates and an uncertain economic outlook are likely also playing a role.

Across the most populous metros, the largest quarter-over-quarter drops in adjusted list prices occurred in: Detroit (-8%), San Francisco (-5%), Philadelphia (-5%) and Indianapolis (-5%).

Home buyer tip: The current economic outlook is unclear — consumer sentiment is declining amid frequently changing economic policies. For example, 13% of Americans said they would delay a home purchase in the next 12 months due to tariffs, according to a recent NerdWallet survey. If high rates, high prices and economic uncertainty are giving you pause, it may be worth waiting. Use the extra time to save for a larger downpayment and tidy up your credit score. That way, when the time is right, you’ll be prepared to take the plunge.

Monthly payments still out of reach

Despite slightly lower prices across many markets, rising mortgage rates offset much of the benefit. The typical first-quarter list price was $413,700. With a 9% down payment (the average for first-time home buyers last year), buyers would be looking at a $3,240 monthly mortgage payment. This includes homeowners insurance, real estate taxes and private mortgage insurance (required for down payments less than 20%).

Your ability to afford a home depends not only on the price, but your income and other commitments like outstanding debt.

One rule of thumb suggests homeowners spend no more than 28% of their gross monthly income on housing. Applying that to the estimated typical home buyer payment for the first quarter, buyers would need to make at least $138,700 per year, and that’s without considering other debt obligations.

As it stands, that $3,240 payment would be about 42% of the current average before-tax monthly income for households of first-time home buyer age.

Home buyer tip: When you go into the market as a buyer, it’s important to look at all of the numbers that would go into your monthly housing payment, as they can considerably impact your budget. The biggest: your downpayment. But shopping around for homeowners insurance and the lowest mortgage rate available can also make a difference. Don’t focus solely on the home sale price — these other costs add up quickly.

Listings pause their rebound from a deep deficit

The number of available homes for sale typically recedes slightly in the first quarter of the year, and this year the data held to trend, with average listings falling 7% across the nation compared with the previous quarter. Still, the overall trend is upward — Q1 listings increased by 27% from the same period last year.

Across the country’s most populous metro areas, listings fell most dramatically quarter over quarter in Buffalo, New York and Grand Rapids, Michigan, where there were 30% fewer listings in the first quarter. However, the biggest improvements over the course of the past year were seen in Denver (where listings were up 62%, year over year), Las Vegas (+59%) and San Diego (+58%).

Home buyer tip: More listings often mean more competition. However, when interest rates are high and the economic outlook unclear, more homes might not be enough to entice more buyers. In some markets, this lack of demand could lead to conditions likely to benefit the home buyer — greater negotiating power, for example. A local real estate agent can help you determine the current market conditions where you’re shopping.

METHODOLOGY

Monthly median list price and list count figures are from monthly inventory data from the Realtor.com residential listings database as of May 1, 2025. All nominal list prices were adjusted to March 2025 dollars using the U.S. Bureau of Labor Statistics’ consumer price index. All monthly median figures were compiled into quarterly averages.

The median age of first-time home buyers is 38, according to the National Association of Realtors’ 2024 Profile of Home Buyers and Sellers. Estimated income for first-time home buyers was derived from the U.S. Census Bureau’s 2023 American Community Survey metro-level median household income for householders ages 25-44 — the range likely to include most first-time home buyers — and adjusted to March 2025 dollars using the Bureau of Labor Statistics’ Employment Cost Index.

Homeowners insurance premiums were estimated using a sample policy profile across all markets through Quadrant Information Services.

Additional sources for this analysis include: population estimates and median real estate taxes from the American Community Survey, U.S. Census Bureau and the average Q1 rates on 30-year fixed mortgages, Freddie Mac Primary Mortgage Market Survey.