Why First-Time Homebuyers in Phoenix Are Facing the Toughest Market on Record

Every spring, the National Association of Realtors releases a report on who is buying homes in America. It usually gets a few headlines, people argue about it on social media for a day or two, and then things move on. We’ve all heard that first-time homebuyers in Phoenix are facing an uphill battle, but…

This year’s report stopped me in my tracks.

Not because it was surprising. Honestly, it confirmed what I’ve been working with first-time homebuyers in Phoenix for the past 27 years. But seeing the numbers all in one place, laid out clearly in black and white, made it hard to look away.

Here is the short version: first-time homebuyers now make up just 21 percent of all home purchases in America. That is the lowest share ever recorded since NAR started tracking this data back in 1981. Before the 2008 financial crisis, that number consistently sat around 40 percent.

At the same time, Baby Boomers now make up 42 percent of all buyers, tied for the highest share ever recorded. Those two facts sitting side by side tell a story that goes well beyond a slow housing market.

The common explanation, and why it is incomplete

When reporters asked NAR’s deputy chief economist about this, the answer was essentially: we need more starter homes. The housing market is missing affordable entry-level inventory, and once we build more of it, first-time buyers will come back.

That sounds reasonable. But when you dig into the actual numbers in the report, the picture gets more complicated.

The biggest homes in the sample were bought by Older Millennials, people in their late 30s and early 40s, who also happen to be the highest-earning generation in the country right now, with a median household income of $132,700. That makes sense. They have kids at home and need the space.

But here is the part that caught my attention. A meaningful portion of Boomer buyers, particularly those 71 and older, are purchasing homes in the 1,500 to 2,000 square foot range. These are the same homes that a first-time buyer or a young family would be looking at.

“The downsizing Boomer and the first-time buyer are often shopping in the same aisle, but they are not shopping with the same cart.”

The math that changes everything for first-time homebuyers in Phoenix

Let me walk through a scenario that the This year’s report quietly supports with its own numbers.

Picture a Boomer couple who bought their family home in the early 2010s. Home prices in most U.S. markets have more than doubled since then. They sell that home today, pay off what they owe, cover closing costs, and walk away with somewhere around $500,000 in cash.

Now they want to downsize. They are looking at a smaller home, maybe $300,000. They can either put a large down payment on it, or in many cases, just pay cash outright. The NAR report shows that 39 percent of buyers 61 and older are paying cash for their next home.

Now compare that to the typical first-time homebuyer in Phoenix. They are likely using an FHA loan with 3.5 percent down, borrowing from family to cover closing costs, and stretching their budget to qualify in the first place. When those two parties make offers on the same home, there is no competition. The cash offer wins almost every time.

This is not a criticism of Boomers. They saved, they paid their mortgages, and their homes went up in value. That is not a mistake, that is the system working as designed. But we do have to be honest about what it means for the people trying to get into that system for the first time.

Investors are part of the picture too

There has been a lot of noise in recent years about Wall Street hedge funds buying up American homes. The truth, according to data from Redfin and CoreLogic, is more complicated.

Large institutional investors, the ones that own 1,000 or more homes, actually pulled back significantly. Their market share dropped from a peak of 2.4 percent of all sales in 2022 down to just 0.3 percent today. Several of the biggest operators were actually net sellers in 2025.

But smaller investors, individuals or companies owning three to ten properties, are still very active. And they concentrate heavily in the lower price tiers, which is exactly where first-time buyers are shopping. Investors purchased 26 percent of all low-priced homes sold in the first quarter of 2025. That is nearly double their share in the mid and high price tiers.

So when someone says we just need to build more starter homes, here is what they are actually proposing: we build more affordable entry-level inventory that will immediately be bid on by cash-strong Boomers, small investors with spreadsheets full of yield calculations, and first-time buyers with an FHA loan and help from mom and dad. Two of those three groups hold major financial advantages. One of them usually wins.

What is happening to total home sales

All of this feeds into one more number the report highlights. Total home sales in the U.S. are on track to come in below 4 million this year. The last time that happened was 1995, when the U.S. had 266 million people. We now have 340 million.

If first-time homebuyers in Phoenix cannot get onto the first rung of the housing ladder, the whole ladder stops moving. The first-time buyer sells to the move-up buyer who sells to the empty nester. When the bottom rung goes away, the whole chain slows down.

What does this mean for first-time homebuyers in Phoenix and Scottsdale specifically?

Phoenix and Scottsdale have been among the fastest-appreciating housing markets in the country over the past decade. That has been great news for longtime homeowners. Many of the families I work with in the Phoenix and Scottsdale areas have seen significant equity gains that give them real options when it comes time to downsize or relocate.

But it also means that the gap between where a first-time buyer can qualify and where the inventory actually exists has grown considerably. Entry-level in the Phoenix metro is not what it was five or ten years ago. And the same forces playing out nationally, cash-strong downsizers, investor activity in the lower price tiers, limited affordable new construction, are playing out here too.

If you are a longtime Phoenix or Scottsdale homeowner thinking about your next move, understanding this landscape matters for you. It affects what you can expect when you list your home, who the likely buyers will be, and where the competition sits on the other side of your purchase.

And if you have adult children or grandchildren trying to buy their first home in this market, this report explains a lot of the frustration they may be experiencing. It is not that they are doing anything wrong. They are trying to enter a market where the financial advantages are heavily stacked against them.

The bottom line

I have been in real estate in Phoenix for 27 years. I have seen the market crash, recover, and run hotter than almost anyone predicted. Through all of it, my job has been to help families make clear-headed decisions, not based on hype or fear, but on what the actual numbers say and what they mean for real people making real decisions.

What the NAR’s 2026 report says is this: the housing market has shifted in ways that make it significantly harder for first-time homebuyers in Phoenix to participate. That is not a temporary blip. It is a structural change that has been building for years. Building more starter homes would help at the margins, but it does not solve the core problem, which is that the people competing for those homes often have financial advantages that first-time homebuyers in Phoenix simply cannot match.

There are no easy answers here, and I am not going to pretend there are. What I do know is that understanding the landscape clearly is the first step to navigating it well. Whether you are a longtime homeowner figuring out your next chapter, a parent helping your kids think through their options, or a first-time buyer trying to make sense of a complicated market, knowing what is actually happening is better than guessing.

That is what I am here for.

Frequently Asked Questions

Why is it so hard to buy a first home in Phoenix right now? First-time homebuyers in Phoenix are competing against downsizing Boomers with large amounts of cash from home sales, plus investors who concentrate heavily in the affordable price range. A cash offer almost always beats an FHA loan in a multiple-offer situation.

Is the Phoenix housing market getting better for first-time homebuyers in Phoenix? Not significantly yet. The 2026 NAR report shows first-time buyers nationally hit a record low of 21 percent of all purchases. Phoenix has seen some of the strongest price appreciation in the country, which makes the entry-level gap even wider here.

What can a first-time homebuyer in Phoenix actually do? Work with an experienced local agent early, get fully pre-approved before you shop, and be realistic about neighborhoods and timing. A clear strategy matters more than ever in this market.

Should I wait for prices to drop before buying in Phoenix? Timing the market is risky. The better question is whether the home fits your budget and your life for the next several years. That is the conversation I have with every buyer I work with.

Who is Bob Hertzog and why should I trust his take on this? Bob Hertzog is a Phoenix-area real estate agent with 27 years of experience, licensed in Arizona since 1999. He works primarily with longtime homeowners, downsizers, first-time homebuyers, and families relocating to the Phoenix and Scottsdale areas. Reach him at 602-957-1583 or BobHertzog.com.

Bob Hertzog, Your Real Estate Dad 602-957-1583| BobHertzog.com