Mortgage rate declines and better employment prospects are working in concert to make the housing market more agreeable to generally younger first-time home buyers. With rents also rising, this could mean a good number of consumers choosing to own a home instead of renting and with all that in mind, recently Zillow released data enumerating the top three cities for first-time home buyers to purchase property in.
Zillow economist Skylar Olsen had analyzed a number of cities and given the top three selections, and according to her, the areas she had chosen are metros “where places are still affordable.” As home price increases were in the double-digits for several months in 2013 and 2014, this made it hard for many potential first-time home buyers to keep up, thereby forcing them to keep sitting the fence.
But it was more than just affordability that Zillow took into account; when analyzing the United States’ 50 most populous metropolitan markets, the company also looked into entry-level home supply and median incomes for individuals aged 23 to 34 when compiling its picks.
The above criteria essentially means glitzy cities like San Francisco and New York City are not included – economies in those metros is on the way up, but home price increases in those rather premium market were just too fast for them to be considered. This was backed up by Olsen, who said that millennials who are asked “which metros they feel confident they can become homeowners in” are hardly likely to mention San Francisco or New York.
For the top three picks, Zillow started out with Chicago as the third-best market, saying that the so-called “Second City” does coincidentally have the second-largest supply of entry-level homes among the 50 metros Zillow had analyzed. There are presently 11,200 entry-level homes in Chicago, which is less than half of the 27,600 such homes in New York, but up 6.5 percent year-over-year.
Consumers are expected to spend only 16.2 percent of their monthly income on home payments, while the median household income of workers aged 23 to 24 had gone up by 14.3 percent since 2009.
Atlanta was mentioned as the second-best market for first-timers, as typical entry-level buyers in the city only have to pay 15.2 percent of their monthly income when it comes to paying their mortgage bills. Younger workers in the city have seen their median incomes go up by 9.5 percent over the past five years.
As for starter homes in Atlanta, Zillow said that there are approximately 5,800 as of the time of the report, or 19.5 percent more homes on a year-over-year basis. According to Olsen, Atlanta has a solid supply of starter homes due to values being gutted by the late-2000s housing crisis, and the fact that prices have not recovered completely.
Last, but not the least, Pittsburgh was named the most ideal city for first-time home buyers to purchase a home in, as Zillow noted that consumers would typically pay just 11.7 percent of their median household income toward their mortgage bills. Young workers’ income has grown by 14.1 percent since 2009, while entry-level home supply has gone up 8 percent to about 3,300. As Olsen put it quite succinctly, Pittsburgh is an “extremely affordable” city indeed.
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