Against the odds—and conventional wisdom—the nation’s largest home builders have engineered a dramatic shift toward serving first-time homebuyers (FTBs). New data from the AEI Housing Center show that in 2024, 51.2% of all new construction sales by the top 20 builders went to FTBs, up significantly from just 38.6% in 2014.

This shift has occurred not only in who these homes are being built for, but also in how many are being built. After adjusting for subsequent acquisitions to keep comparisons consistent, these builders delivered 323,000 new homes in 2024, nearly triple the 114,000 they sold in 2012. It’s the highest output in over a decade—demonstrating that large developers are not only expanding access to ownership but also doing so at scale.

This transformation is particularly striking given that new homes typically cost more than existing ones. In 2024, the average new home sold by these builders went for $422,000, up 44% from $292,000 a decade ago. Despite elevated prices and interest rates, first-time buyers are purchasing more new homes than at any time in the past decade.

This transformation has been driven by a deliberate shift in strategy by the nation’s largest home builders. Over the past decade, they have reoriented their focus toward the entry-level market. In 2014, the typical new home they sold was priced 28% above the local area’s median sale price. By 2024, that premium had narrowed to just 6%—a clear indication of a purposeful effort to deliver more attainable homes for first-time buyers. This shift has proven to be a savvy business move, as demand for entry-level housing far outpaces supply—unlike the more saturated move-up market. To meet this need, the largest builders are expanding affordability through a blend of strategic design choices and financial innovations:

• Building smaller homes: The median home size has declined from 2,750 in 2014 to 2,350 square feet in 2024. While construction costs vary by region and design, this 400 sq. ft. reduction can lower the overall price of a new home by $60,000 to $100,000—a meaningful shift for budget-conscious buyers.
• Offering financial tools: Many top builders now routinely buy down mortgage rates for their customers. DR Horton and Lennar, for instance, offered rates 90 to 120 basis points below the prevailing market average of 6.8% in 2024. This can reduce monthly payments by $180 to $270, making ownership more attainable. As we’ve previously noted, rate buydowns are often more cost-effective than price cuts and especially helpful for borrowers constrained by debt-to-income (DTI) limits. However, practices vary: some builders, like Ashton Woods, offer no rate buydowns at all.

At the same time, borrowers are meeting the moment:

• They’re more financially qualified. Average credit scores have increased to 737, up about 7 points since 2014. Household incomes now average around $130,000, reflecting steady wage growth over the past decade.
• They’re also taking on more debt to qualify. Due to more federal financing guidelines, borrowers are permitted to take on higher DTI ratios. The typical borrower now spends up to 41% of gross income on debt payments, up from 37% a decade ago. While this flexibility helps more buyers qualify in a high-cost environment, it also leaves less room for other living expenses, savings, or financial shocks.

Local governments have a powerful opportunity to accelerate this trend toward more home construction and affordability by revisiting minimum lot size requirements in new subdivisions. For the nation’s largest builders, median lot sizes have already declined from 7,300 square feet in 2014 to 6,250 in 2024—a notable shift. As the accompanying chart illustrates, there is a strong linear relationship between lot size and home size: smaller lots typically lead to smaller homes. This downsizing trend not only enables 17% more starter homes to be built on the same amount of land, but also drives substantial cost savings, helping to make new homes more attainable for a broader range of buyers. Importantly, reducing lot size requirements requires no expensive affordable housing subsidies.

Unfortunately, builders largely remain constrained by local zoning ordinances that mandate unnecessarily large lots. Our research shows that allowing smaller lots could have a meaningful impact:

• More housing construction and lower home prices, expanding access for starter homes first-time buyers want to purchase,
• Higher property tax revenues from a more efficient use of land,
• Stronger local economies through increased population density that supports businesses and job growth.

In many communities, the barrier to affordability isn’t a lack of effort—it’s outdated zoning and land use rules.

Large developers are often painted as obstacles to affordability. But the numbers tell a different story. Over the past decade, they’ve expanded the path to homeownership for more first-time buyers—delivering real solutions where others see only problems.

The AEI Housing Center’s detailed breakouts for select builders from 2012-2024 can be found here.