FL cities lead the best housing markets for first-time buyers

Dive Brief:

  • The combination of lower housing costs, higher inventory levels and expected home-value growth is driving new homebuyers to the Southeast and Midwest, with the Florida cities of Orlando and Tampa deemed the best markets for first-time buyers today, according to Zillow.

  • Purchasing a home in West Coast markets can be difficult for many new buyers, particularly in the San Francisco Bay Area, where a 5% down payment is greater than the value of a 20% down payment in more affordable markets.

  • Following Orlando and Tampa as the top cities for new buyers are Indianapolis, Las Vegas, San Antonio, Pittsburgh, Atlanta, Detroit, Dallas and Cleveland to round out Zillow’s top-10 list.

Dive Insight:

Although growing employment opportunities and rising wages gave a slight bump to housing affordability during Q1 2017, many prospective first-time buyers are having trouble saving up for a down payment. Seven in 10 renters across 20 U.S. markets said they were unable to afford a down payment, according to an April report from Zillow. Student loan debt, rising mortgage rates and low job security could also be hampering first-time buyers' ability to gain a foothold in the market.

The shortage of for-sale, entry-level homes is also holding back younger, price-sensitive buyers from entering the market. The starter-home supply fell 8.7% year-over-year in Q1 as the median starter home price jumped 8.3% for the period. And with home prices on the rise, many owners of existing homes are wary of trading up to newer, bigger properties — a move that would loosen inventory conditions at the entry level.

Still, first-time buyers — many of whom are millennials — made up more than one-third of home sales in 2016, according to the National Association of Realtors, and that number only stands to increase as millennials age, their earnings grow, and many complete life events that are typically homebuying catalysts, such as getting married and having children. 

For lack of sufficient existing entry-level inventory to meet the needs of first-time buyers, builders are debuting new-construction products targeting this group. Among them, Meritage Homes' LiVE.NOW. line and D.R. Horton’s Express Homes division offer smaller footprints, standardized features and a lower price point.

Lenders are addressing new buyers' financial constraints with loan products that allow them to put less than 20% down. Additionally, Federal Housing Administration–backed mortgage loans are projected to increase as more millennials buy homes, with the loan category accounting for more than one-third of the home loan market in February

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Filed Under: Residential Building Economy