With home prices rising just about everywhere, first-time buyers are set to enter one of the most competitive markets imaginable this spring. Across the country, homes are selling within days and after multiple offers, pricing out buyers of all ages—especially millennials, who’ve made up the majority of first-timers for the past few years.
No getting around it, things are tough out there. So where are the best cities for stressed-out first-time home buyers to nail a deal in 2021? Realtor.com crunched the numbers to find out.
Bottom line: Competition is expected to heat up in the coming months, so buyers looking for affordable homes in places with plenty of good jobs and ample things to do may need to expand their home search outside large urban meccas like New York and San Francisco, and even the newer real estate darling Austin, TX. Smaller, less-hyped cities could offer more options for first-time buyers, especially as more people can work from home or only go into the office a couple of times a week.
“For a first-time home buyer in this generation, the issue of affordability is front and center, and that’s especially true for many millennials who moved to big cities to start and build their careers,” says George Ratiu, senior economist at realtor.com®. “Between student debt, slow-growing wages, and fast-growing home prices, when the pandemic hit they were still in these large cities but no closer to being able to afford a home.”
At the top of our list of best markets for first-time home buyers was Bloomington, IL, where the median list price last month was $160,000—less than half of the national median price tag of $370,000 in March. Located within two hours of Chicago, St. Louis, and Indianapolis, Bloomington offers plenty of jobs, low commute times, and affordable housing, according to Becky Gerig, a real estate broker at Re/Max Choice.
“Because it’s in the middle of the state of Illinois, it’s a great little spot,” Gerig says. “For young people, there is a lot of opportunity for jobs.”
Big employers in the area include State Farm Insurance and multiple colleges, including Illinois State University. Commute times are also low here.
“We can get from one side of the town to another in 20, 25 minutes,” Gerig adds.
To help find other places that could be a good fit, realtor.com looked at nearly 800 cities, all with at least 50,000 residents. We took into account six factors, including home prices compared with local incomes; the percentage of 25- to 34-year-olds living in these places; the number of homes for sale; job opportunities; distance to work; and amenities such as bars and restaurants. To achieve geographic diversification, the list was limited to one city per state.
So where are the best places for newbies to take their first splash into the housing market? Let”s take a look.
These cities offer more affordable home prices
Price is one of the most important factors in choosing a home, but as a group, millennials haven’t exactly been able to bank much cash over the past decade or so. The pandemic-fueled recession is the second economic crisis many in this age group have lived through, and crippling student loan debt hasn’t helped matters. According to a recent realtor.com survey, 44% of potential first-time home buyers say they haven’t saved enough for a down payment.
“Millennials’ experience with recessions has taught them that economic success isn’t guaranteed and sometimes living below your means makes sense,” says Ali Wolf, chief economist at housing research firm Zonda.
All of the top 10 markets had median home prices below the national median price of $370,000. Kalamazoo, MI, has the lowest median home price, at $155,000, while Taylorsville, UT, had the highest, at $350,000.
These cities have plenty of young people and things to do
Young adults, of course, tend to prefer to be around other people their age. Nine of the top 10 cities on this list are home to at least one four-year college or university, which is likely part of the reason why residents in these places tend to be younger than the country overall.
Savannah, GA, has the largest share of adults aged 25-to-34, making up 16.9% of the city’s total population. It has a thriving nightlife scene with a mix of live music venues, bars, and dance clubs.
Only two places on this list (Rapid City, SD, and Harrisonburg, VA) had a lower share of younger adults than the national estimate. However, what Rapid City and Harrisonburg lack in their share of younger Americans, they make up for with lower unemployment, more bars and restaurants, and shorter commute times than the rest of the country. Harrisonburg also has more homes for sale, while Rapid City offers more affordable listing prices.
These places have more homes to choose from
A big part of the reason home prices are so high these days is because there aren’t enough properties on the market for everyone who wants them. That’s leading to bidding wars, and savvy buyers are listing their homes for higher prices—sometimes way higher—than they would have just a few months ago.
Several of these markets have a higher proportion of home listings than some of the inventory-squeezed cities. That provides more of an opportunity for first-time buyers to close the deal on a home they can actually afford.
Schenectady, NY, with a median home price of $210,000, tops the inventory list with nearly 18 listings per 1,000 households. Iowa City, IA, offers 13.3 listings per 1,000 households, followed by Savannah, GA, at 13.1 listings per 1,000 households. To be clear, this still doesn’t mean there are a ton of homes on the market in these places. (For context, the historical national average number of homes per 1,000 households had been 17 since the year 2000.)
The housing market is expected to remain hot this year
No matter how you slice it, the housing market is expected to remain very heated for the foreseeable future. That’s because even as more sellers are vaccinated and feel comfortable listing their homes, housing experts still don’t expect enough listings to go up for sale to meet demand.
That’s particularly difficult for first-time buyers who can’t use the equity in their current house to help pay for their next one. These buyers also often don’t have the cash to waive the inspections and contingencies that many sellers are requesting. (In case it needs to be said: It’s never a good idea to waive contingencies.)
“Competition for housing is fierce,” Zonda’s Wolf says. “First-time buyers have to figure out a way to make their bid stand out when competing with all-cash buyers or older buyers bringing a large down payment to the table.”
The post These Are the Best Cities for First-Time Home Buyers in 2021 appeared first on Real Estate News & Insights | realtor.com®.