For First-Time Homebuyers, It’s Location, Location–and a Down Payment
First-time homebuyers, not surprisingly, are likely to get better bang for their buck in the Southeast or Midwest and less so in coastal areas, said Zillow Inc., Seattle.
“In the best markets for first-time buyers, home shoppers will find more affordable homes and a less competitive market. Most of the best markets for first-time homebuyers are in the Southeast or Midwest,” Zillow said in its Group Report on Housing Trends.
Zillow said Orlando and Tampa top the list as the best markets for first-time buyers, with affordable homes and relatively more inventory than other markets. Also making the list are San Antonio, Atlanta and Dallas. “These markets are less competitive, and buyers will see strong growth over the next year as they begin to accumulate equity,” the report said.
The report noted while first-time buyers make up nearly half of recent buyers, having enough saved for a down payment could be holding first time buyers back in certain markets. More than two-thirds of renters say that saving for a down payment is the biggest barrier to homeownership. In all but three of the 10 best markets for first-time buyers, the median home value is lower than the national median home value, which means they require less money up front as a down payment.
“The Bay Area and Pacific Northwest have strong job markets, but new buyers will have a tough time entering the market due to low inventory and high home prices,” the report said. It noted buyers in these areas would have to come up with more than $70,000 as a down payment. However, those looking to buy in Florida only need to put about $40,000 down on a median home.
“As millennials reach the typical home buying age, they are coming into a tough housing market with low inventory and lots of competition,” said Zillow Chief Economist Svenja Gudell. “These markets have more favorable conditions for first-time buyers to become homeowners. More challenging metros aren’t out of reach for new buyers, but they should be prepared to face a more competitive buying environment.”
Zillow said the Ten Best Markets for First-Time Homebuyers include:
–Orlando, Fla.
–Tampa, Fla.
–Indianapolis
–Las Vegas
–San Antonio, Texas
–Pittsburgh, Pa.
–Atlanta
–Detroit
–Dallas
–Cleveland
“A 5 percent down payment in the Bay Area is larger than a 20 percent down payment in most of the best markets for first-time buyers,” the report said. “For buyers who can come up with a down payment, low inventory and few price cuts make these markets especially competitive.”