Report reveals the surprising Northeast state where the most first-time homeowners are buying houses

Rhode Island has emerged as the top state for first-time homebuyers, according to Freddie Mac’s latest market outlook.

The state recorded a 14.3 percent increase in the share of mortgages going to first-time buyers since 2019 – the highest increase nationwide.

The trend is surprising, given the high home prices in the state. In September, Rhode Island’s median home listing was $569,950, well above the national median of $425,000.

However, with just 1,465 active listings last month, the state’s small market magnifies the impact of first-time buyer activity.

Change in the share of starters between 2019 and 2024

Freddie Mac’s monthly report for October also shows that the share of mortgages going to first-time buyers across the country has soared, from about 20 percent in 2004 to more than half this year.

Experts attribute this to a wave of millennials reaching home-buying age and fewer transactions by those who already own homes.

Many of them are locked into lower rates before the sharp increase in mortgage costs since the pandemic. As a result, they stayed put instead of moving until mortgage rates fell.

Meredith Whitney, dubbed the “Oracle” of Wall Street, said in August that mortgage rates need to fall below five percent to really kick-start the housing market – and get those locked into cheaper deals to consider moving.

Meanwhile, the Freddie Mac report shows that first-time marketers are making the biggest progress in the Northeast and Midwest, where slower markets are pushing down prices.

Besides Rhode Island, states with the largest increases in new buyers include Iowa (+12.4 percent), Nebraska (+11.3 percent), Wisconsin (+10.9 percent) and Connecticut (+10.8 percent).

In contrast, retirement hotspots like Arizona and Florida have seen slower growth in first-time buyer participation as retirees and older buyers dominate home purchases and drive up prices.

Only two states – Louisiana and North Dakota – have reported a decline in first-time buyer activity over the past five years.

Freddie Mac’s report highlights several challenges these buyers face. Prices of entry-level homes have risen 63 percent more than luxury homes since 2000, increasing affordability problems.

Meanwhile, the ongoing housing shortage, rooted in a slowdown in new construction after the 2008 financial crisis, has left the U.S. short of at least 1.5 million homes.

Despite a revival in the construction sector, this has not been enough to meet demand, leaving many would-be buyers struggling to enter the market.

The report highlights the fierce competition, with around 30 tenants for every home currently for sale.

“Less housing affordability is acutely felt by those looking to purchase their first home, especially those without substantial wealth at their disposal,” the Freddie Mac report says.

In August, a separate report identified the top markets for startups – and half were in the Midwest,

St. Louis has been named as the top destination for Americans hunting for their first home

St. Louis was voted best overall, where buyers will seeInheritance payments will go further and there is a wide availability of affordable housing.

Of the top ten markets mentioned in the new analysis of the home sales site ZillowHalf are in the Midwest, including Detroit, Minneapolis, Indianapolis and Kansas City.

According to Zillow, first-time buyers accounted for half of all homebuyers last year – the highest share since at least 2017.

High mortgage rates last year meant that many homeowners were incentivized to stay put due to the low interest rates on their current mortgage, leaving some potential repeat buyers on the sidelines.