I believe the lack of popularity is more of an economics problem. There are established business models for SaaS apps or freemium with ads. But, the business model for local-first apps is not as lucrative. Those who like the local-first model value features like: data-sovereignty, end-to-end encryption, offline usage, etc. These properties make existing business models hard-to-impossible to apply. My current thinking…
It's also a programming complexity problem.
A local-first app has to run on a zillion different configurations of hardware. A cloud-first app only has to run on a single configuration and the thing running on the user hardware is just a view into that singular cloud representation.