Best Metros for First-time Homebuyers? Depends on Who You Ask

Best Metros for First-time Homebuyers? Depends on Who You Ask

Zillow’s ranking of best cities for new homebuyers places Tampa and Las Vegas at the top, while Bankrate found Pittsburgh and Raleigh to be most amenable.

In spite of the low unemployment rate and flat inflation in the United States, housing affordability remains a hurdle for first-time homebuyers.

The U.S. housing market has cooled recently, creating conditions amenable for buyers. Zillow researchers note that inventory is up 1 percent year-over-year, after being down 8.7 percent last year. It’s the first time inventory has been up heading into home-shopping season in at least five years. In even more welcome news for first-time buyers, inventory of less-expensive starter homes has turned around far more – up 4.1 percent after being down 12.9 percent last year. Yet, there still are not enough homes for sale to meet buyer demand, and the market remains competitive.

According to Zillow, first-time buyers make up 46 percent of all buyers, and more than six in 10 of them are millennials, creating a recipe for frustration.

“Unfortunately, prices of homes in the lower third of the market have risen so much in recent years that for many households’ budgets they no longer qualify as affordable,” said Skylar Olsen, Zillow’s director of economic research. “But markets like Tampa and Las Vegas still provide plenty of bargains.”

In fact, Tampa tops Zillow’s list of most-affordable markets for first-time homebuyers for the second consecutive year.  Zillow’s list of the best markets for first-time buyers is based on four metrics:

  • Low median home value that requires a smaller down payment
  • Strong forecasted home value appreciation, helping buyers’ overall wealth grow
  • High inventory-to-household ratio, to indicate available supply
  • High share of listings with a price cut

Not to be outdone, Bankrate, which offers comparisons of financial information, has ranked best and worst metros for first-time homebuyers. Topping its list was Pittsburgh, Pa., followed by Raleigh, N.C. Bankrate’s methodology used 13 measures related to affordability, culture, job market, market tightness and safety, and was applied to the 50 largest metro areas in the United States.

For our affordability ranking, we used the U.S. Home Affordability Report and property tax amounts from Attom Data Solutions. We also looked at owner-occupancy rates for 25- to 44-year-olds for each MSA tracked by the U.S. Census Bureau. Bankrate went a step further and rated the worst metros for entry-level homebuyers, and predictably advised these consumers to “look past the West Coast and Rocky Mountains.”