First-time home buyers are becoming one of the largest segments of the housing market, accounting for half of all buyers in 2023. While this demographic continues to grow, they are forced to contend with an expensive housing market that doesn’t necessarily favor them .
When interest rates finally fall from their recent all-time highs, the long process of getting mortgage rates back to a level where sellers are incentivized to sell and buyers can afford homes will likely begin. But all this will be the end result of a long chain reaction that the Federal Reserve has not yet set in motion.
Fortunately for homebuyers, not all markets are created equal. While first-time homebuyers anxiously wait for rates to drop, there are plenty of options in the markets that offer great value for money.
Real estate company Zillow recently released its list of the best markets for starter homes. The company used several metrics to determine these major housing markets, including rental prices, affordable housing inventory, rental household inventory, and density of households aged 29 to 42 years.
Here are the 10 markets for first-time homebuyers in 2024, ranked by Zillow in order of aggregate score:
- St. Louis, Missouri
- Detroit, Michigan
- Minneapolis, MN
- Indianapolis, Indiana
- Austin, Texas
- Pittsburgh, PA
- San Antonio, Texas
- Birmingham, Alabama
- Kansas City, Missouri
- Baltimore, Maryland
In a blog post, Zillow explained that the data allowed it to rank markets based on how easy it is to navigate the buying process. Markets with low rents, for example, help buyers save more quickly for a down payment; inventory metrics identify markets with more active, affordable listings and areas with more listings per renter household, providing more options; and the age metric measures the portion of households whose owners fall within Zillow’s “homebuying age” of 29 to 42. A higher density of younger homeowners would suggest a higher success rate for first-time buyers.
In summary, this means that shoppers should theoretically have more purchasing power in these cities than anywhere else in the country.
It’s worth noting that Zillow’s listing focuses on large urban areas rather than suburbs. In January, Realtor.com released its list of the best markets for first-time homebuyers; especially highlights suburban cities. However, there are similarities between the two, such as the inclusion of many Midwestern and Southern markets and the lack of West Coast cities.
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