Cities Where First-Time Buyers Beat Investors — And Where Investors Still Win

A new analysis shows that some U.S. cities are giving first-time homebuyers a clear advantage over real estate investors, while others remain heavily tilted toward investor activity. According to research from Neighbors Bank, first-time buyers purchased about 69% of starter homes nationwide last year, compared with 31% bought by investors. But the balance shifts sharply depending on local policies and market conditions.

One of the strongest buyer-friendly markets is Denver, where strict rules on short-term rentals limit how investors can use properties. Because investors have fewer profit opportunities, they are less aggressive in bidding for entry-level homes. As a result, 84% of starter-home purchases in Denver last year were made by first-time buyers. Only 16% went to investors, even though the median list price in the metro sits near $495,000.

The situation is the opposite in Miami, where state law prevents cities from restricting short-term rentals. Investors can freely buy homes and convert them into vacation rentals, giving them the upper hand. In Miami, where the median home price is around $499,000, investors bought 57% of starter homes, leaving first-time buyers with 43%.

“Affordability doesn’t exist in a vacuum,” said Jake Vehige, President of Mortgage Lending at Neighbors Bank. “Two cities with similar home prices can have completely different outcomes depending on how they regulate investor activity and protect owner-occupants.”

Where First-Time Buyers Are Leading the Market

The study looked at federal mortgage data from 2024, focusing only on financed purchases. It defined starter homes as properties affordable to a household earning 30% of the area’s median income.

Several cities stood out as places where first-time homebuyers are thriving, thanks to a mix of policy and affordability.

Seattle, Washington — 81% First-Time Buyers

Seattle’s strict short-term rental rules limit hosts to just two rentals, and one must be their primary residence. These rules make it difficult for large investors to build a portfolio of vacation rentals. As a result, first-time buyers captured 81% of the city’s starter-home sales.

Los Angeles, California — 81% First-Time Buyers

Los Angeles also gives owner-occupants priority. The city restricts STRs to primary residences, preventing investors from turning lower-priced homes into vacation rentals. In addition, a state law gives tenants, nonprofits, and owner-occupants a 45-day window to match investor bids on foreclosed homes. These policies helped first-time buyers secure 81% of starter-home purchases.

Indianapolis, Indiana — 78% First-Time Buyers

Affordability is the main advantage in Indianapolis, where prices are lower compared to major coastal cities. Local programs also support owner-occupants by working to restore vacant and abandoned homes and sell them to residents rather than investors.

Dayton, Ohio — 75% First-Time Buyers

Dayton’s strong first-time buyer share is supported by programs like the Montgomery County Land Bank, which sells renovated homes with deed restrictions requiring owner occupancy. This helps protect low-income buyers from being outbid by investors.

Why Policy Matters More Than Price

One of the biggest takeaways from the study is that home prices alone do not determine who wins the bidding war. Denver and Miami have nearly identical price levels, yet they produce opposite market outcomes.

Cities that regulate how properties can be used especially when limiting short-term rentals tend to favor first-time buyers. Cities that allow unrestricted investor activity often see more aggressive investor purchases, pushing buyers out of the starter-home segment.

A Market Split Between Buyers and Investors

As the housing market continues to shift heading into 2026, many buyers will be looking for metros where they are not consistently outbid by investors. Meanwhile, investors will continue targeting areas with flexible rental rules and strong tourism demand.

Understanding these differences can help both buyers and policymakers find strategies that support affordability and fair access especially for younger and first-time buyers trying to get into the market for the first time. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.