Zillows Top 10 Best Markets for First-Time Home Buyers

With record low mortgage rates, it’s a good time to buy a home and certainly worth considering

By Jeff Sorg, OnlineEd Blog

canstockphoto1715200 new owners(April 29, 2016) – Indianapolis, Pittsburgh, and Memphis, Tenn. are the best markets for first-time home buyers right now, Zillow announced. Cleveland, Chicago, Houston, and Birmingham, Ala.also made the top 10.

To determine which markets are best for those looking to buy their first home, Zillow looked for places where it’s more affordable to make a monthly mortgage payment than a monthly rental payment. Zillow also looked at median home values and competition, including how many homes the first-time buyer has to choose from and whether they are likely to be up against all-cash offers.

San Jose, Seattle, and Austin are among the hardest places for first-time home buyers to get in the market – a conundrum for many young people who move to those cities because of their hot job markets, only to find a limited and unaffordable selection of starter homes from which to choose.

“Buying your first home is a big decision that takes a lot of planning,” said Zillow Chief Economist Dr. Svenja Gudell. “First-time buyers across the U.S. are up against high prices and low inventory, but these are the places where the availability of affordable, entry-level homes and the presence of cash-buyers are less of an issue. First-time buyers in these markets won’t have to deal with as many bidding wars or run-away prices; they’ll be able to find a first home that fits their needs with less stress. With record low mortgage rates, it’s a good time to buy a home and certainly worth considering.”

Zillow’s Top 10 Best Markets for First-Time Home Buyers:

  1. Indianapolis
  2. Pittsburgh
  3. Memphis, Tenn.
  4. Cleveland
  5. Chicago
  6. Oklahoma City
  7. St. Louis
  8. Houston
  9. Tampa, Fla.
  10. Birmingham, Ala.

In Indianapolis, home buyers can expect to spend 11 percent of their income on a monthly mortgage payment, four percentage points less than the U.S. average. Renters, on the other hand, can expect to spend 26 percent of their income on monthly rent — an incentive for renters in Indianapolis to become homeowners.

All markets on the list except Chicago have a median home value below the national average. The U.S. Zillow Home Value Index is $186,200.

Best Markets for First-Time Buyers

Zillow Home Value Index (ZHVI)

% Monthly Income for Mortgage Payment

%Monthly Income for Rent

Available Inventory

Cash Buyer Competition

Indianapolis, IN

$        130,200

11.0%

26.1%

High

n/a

Pittsburgh, PA

$        126,700

10.6%

24.2%

High

Average

Memphis, TN

$        112,100

10.9%

27.0%

Average

High

Cleveland, OH

$        125,500

11.0%

26.2%

High

High

Chicago, IL

$        193,800

14.0%

31.1%

High

Low

Oklahoma City, OK

$        132,500

11.0%

25.6%

Average

Average

St. Louis, MO

$        141,900

11.2%

23.4%

High

n/a

Houston, TX

$        172,100

12.5%

30.5%

Average

n/a

Tampa, FL

$        163,600

15.2%

32.2%

High

High

Birmingham, AL

$        128,000

12.0%

26.7%

High

High

Worst Markets for First-Time Home Buyers

Zillow Home Value Index (ZHVI)

% Monthly Income for Mortgage Payment

% Monthly Income for Rent

Available Inventory

Cash Buyer Competition

Salt Lake City, UT

$        234,400

16.2%

26.4%

Low

n/a

Washington, DC

$        364,100

17.2%

26.6%

Average

n/a

New York/Northern New Jersey

$        384,100

25.2%

41.4%

Average

High

Austin, TX

$        247,500

16.9%

30.7%

Low

n/a

San Jose, CA

$        956,500

42.6%

41.2%

Low

Low

Los Angeles-Long Beach-Anaheim, CA

$        565,400

40.4%

47.6%

Low

Low

Sacramento, CA

$        339,700

24.3%

30.7%

Low

Low

San Francisco, CA

$        806,600

41.3%

46.1%

Low

Low

San Diego, CA

$        506,100

33.0%

40.3%

Low

Low

Seattle, WA

$        382,700

22.7%

31.2%

Low

Low

SOURCE Zillow

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Jeff Sorg

About the Author

Jeff Sorg is a co-founder of OnlineEd®, a Web-based vocational school founded in 1997 where he also serves as Corporate Secretary, Chief Operating Officer, and School Director. Sorg holds vocational instructor licenses in Oregon, Washington, California, and Nevada and has authored numerous pre-licensing and continuing education courses. Sorg was awarded the International Distance Education Certification Center's CDEi Designation for distance education in 2008. OnlineEd® provides real estate, mortgage broker, insurance, and contractor pre-license, post-license, continuing education, career enhancement, and professional development and designation courses over the Internet.