2018 Best Markets for First-Time Buyers Analysis – Zillow

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First-time buyers looking for an affordable home without much competition will have the best luck in Tampa, Florida, according to Zillow®’s 2018 Best Markets for First-Time Buyers Analysis.

Zillow ranked the 35 largest U.S. housing markets based on where first-time buyers have the best chance to find an affordable home with little buyer competition and strong forecasted home value appreciation. First-time buyers make up 42 percent of all buyers, according to the 2017 Zillow Group Report on Consumer Housing Trendsi.

The U.S. housing market is competitive for all buyers, as there are not enough homes for sale to meet today’s strong buyer demand. In January, inventory of the least expensive homes was down 17.1 percent annually, compared to a 9.7 percent decrease for all homes. In 2017, nearly a quarter of home sales were above the listed priceii. This puts first-time buyers at a disadvantage this home shopping season because they won’t have the capital from a previous home sale to help fund a down payment or keep up with bidding wars. Saving up for a down payment is the most commonly cited barrier to homeownershipiii.

New buyers will have it easiest in the Southeast, especially Texas and Florida. Five of the top 10 markets for first-time buyers are in those two states. Homes in those markets require a smaller down payment, and buyers are more likely to encounter price cuts.

First-time buyers are likely to face the most difficulty in pricy West Coast markets, especially California metros. Not only are homes expensive, but inventory is especially limited, and it takes longer to break even on a home purchase.

Ten Best Markets for First-Time Homebuyers

  1. Tampa, FL
  2. Indianapolis, IN
  3. Houston, TX
  4. Orlando, FL
  5. San Antonio, TX
  6. Saint Louis, MO
  7. Philadelphia, PA
  8. Atlanta, GA
  9. Las Vegas, NV
  10. Dallas, TX

“More and more millennials are reaching the point in their lives where they are ready to buy a home, but they are entering a highly competitive housing market that has been plagued by low inventory, especially among entry-level homes,” said Zillow Senior Economist Aaron Terrazas. “Southeastern markets will be easiest for new buyers, where homes are more affordable and there’s less competition. People planning to buy for the first time in some of the tougher markets should be prepared to face a more competitive environment, but that doesn’t mean they should count out buying entirely.”

Zillow’s list of the best markets for first-time buyers is based on five metrics:

  • Low median home value that requires a smaller down payment
  • Strong forecasted home value appreciation
  • High inventory-to-household ratio, to indicate available supply
  • Short Breakeven Horizon, which is the time it takes for buying to be financially advantageous compared to renting
  • High share of listings with a price cut

To help first-time buyers better understand all the costs associated with homeownership, RealEstate.com, a Zillow Group brand, calculates an “All-In Monthly Price” for every home and breaks out estimated expenses that might roll up into a monthly payment, including principal and interest, property taxes, homeowner’s insurance, HOA fees and utilities, and closing costs.

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