30 Renters for Every Home on the Market: The Supply Squeeze Facing First-Time Buyers

Key Insights:

• Freddie Mac's latest outlook report sheds light on mounting challenges for first-time homebuyers, including historically low housing inventory and rising competition, with 30 renters vying for each available home.
• Freddie Mac data points to three primary obstacles for future first-time buyers: limited supply, affordability issues, and more challenging economic conditions, such as higher unemployment.
• Since 2023, the unemployment rate for renter households has risen from 5% to over 6%, while the rate for owner-occupied households has remained largely unchanged.

Freddie Mac's latest market outlook report spotlights the obstacles first-time homebuyers are up against. Housing inventory per renter household in the U.S. remains near historic lows, with around 30 renters competing for every home on the market. This marks a sharp increase from fewer than 10 renters per available home back in 2006.

The roots of today’s housing shortage trace back to the Great Recession, which led to a significant slowdown in new construction and, consequently, a severe inventory shortfall. This means that first-time homebuyers now face not only higher home prices and mortgage rates but also increased competition from other prospective buyers.

Freddie Mac’s October Spotlight highlights three key trends for first-time homebuyers:

1. Their growing impact on overall housing demand?
2. Geographic trends among first-time buyers
3. Potential barriers that could limit first-time buyer activity in the near future

Renters' Aspirations and Barriers to Homeownership

A recent LendingTree survey found that 62% of renters worry they may never achieve homeownership:

• 65% cite down payment costs as their main obstacle
• 52% believe home prices are too high in their areas?
• 39% struggle with their credit scores?

Furthermore, over 80% of renters prefer homeownership, including 76% of those earning under $30,000 annually and 79% of Gen Z respondents. Key motivations include:

• 62% prioritize the flexibility that comes with owning a home
• 61% value the stability it offers
• 44% are motivated by the potential for property value appreciation?

Recent Trends Among First-Time Homebuyers

The youngest Millennials and the oldest Gen Z members are now prime homebuying candidates, making these generations increasingly influential in the housing market. Additionally, young renters are earning more than previous generations, even when adjusted for inflation.

As shown in Exhibit 2, the number of renter households aged 25 to 44 with inflation-adjusted incomes of at least $75,000 has risen dramatically since 2012. By 2023, this group included three million households across the U.S.

These favorable conditions are enabling first-time buyers to establish a strong foothold in the housing market. Freddie Mac-funded loan data reveals a historical trend: the share of conventional home loans granted to first-time buyers has grown steadily. As shown in Exhibit 3, this share has risen from around 20% in 2004 to over 50% by the second quarter of 2024.

One likely reason for the increase in first-time buyers receiving conventional loans is the “lock-in effect” of higher mortgage rates, which has slowed the activity of repeat buyers. Between 2018 and 2022, the share of loans going to first-time buyers held steady at around 45%. However, in 2023 and 2024, this share grew as higher rates tempered demand in the resale market.

Even if the entire increase from 2022 to 2024 is attributed to the lock-in effect, first-time buyers still make up a significant portion of total loan activity. If rate-lock conditions continue, first-time buyers will remain critical in sustaining housing demand in today’s market.

Where Is First-Time Buyer Activity Increasing?

Freddie Mac’s loan data also shows which states have seen the most first-time homebuyer activity. Generally, most states show steady growth for this metric but markets in the Northeast and Midwest have seen particularly high shares of first-time buyers, especially in recent years.?

Freddie Mac’s loan data also identifies which states are seeing the highest levels of first-time homebuyer activity. While most states show steady growth, the Northeast and Midwest stand out with particularly high shares of first-time buyers, especially in recent years. Exhibit 4 illustrates the rise in first-time buyers with Freddie Mac-funded loans from 2019 through Q2 2024, showing that areas with moderate or slower home sales—unlike high-demand states like Massachusetts—have seen the most growth in first-time buyer activity over the last five years.

3 Key Challenges for Future Homebuyers

In summary, Freddie Mac’s data highlights three major challenges that may impact future homebuyers, including renters and those living with family or friends:

1. Limited Housing Supply
2. Affordability Concerns (driven by rising homeownership costs)
3. Tougher Economic Conditions — including higher unemployment rates, particularly among renter households

Exhibit 7 in Freddie Mac’s report shows that since 2023, the unemployment rate for renter households has risen from around 5% to over 6%, while the rate for owner-occupied households has stayed relatively stable.

From January 2000 to July 2024, entry-level home prices have surged 63% more than high-end home prices. Rising mortgage rates have intensified the challenge, with the average 30-year fixed rate reaching 7.00% as of October 28, 2024.

As economic and supply constraints continue, supporting first-time buyers will be crucial to preserving a balanced and accessible housing market.