by Lisa Sturtevant, PhD
Chief Economist, Bright MLS
With mortgage rates stuck near 7% and home prices hitting record highs in some markets, it is a challenging time for first-time homebuyers. The median home price nationally has increased by more than 40% since 2019, and the typical monthly payment has nearly doubled. Affordability challenges have sidelined some homebuyers, but there are some markets where first-time buyers will have an easier time finding a home.
Where Are the Best Markets for First-Time Homebuyers?
Comparing household incomes to median home prices is not necessarily a good way to identify the best markets for first-time buyers. First-time buyers generally have lower incomes than overall homebuyers. They are also more likely to purchase less expensive homes.
Instead of comparing overall median incomes to median home prices, to find the places where housing is most attainable to first-time buyers, we compared the median household income of renters to the monthly payment needed to purchase a single-family home priced at the 25th percentile of the market. (Homes priced at the 25th percentile of the market are more expensive than 25% of the homes listed for sale, but they are less expensive than 75% of the market.)
Ohio Has the Most Options for First-Time Buyers
Four metro areas in Ohio made the Top 10 list of Best Markets for First-Time Homebuyers—Toledo, Akron, Cleveland, and Dayton. In Toledo, for example, in the second quarter of 2024, the 25th percentile home was priced at $99,900, while the median renter income was $35,546. Assuming a 10% down payment and a 7% percent mortgage rate, the monthly payment in the Toledo metro area would be 20% of the typical renter income.
It is still difficult for first-time buyers even in some of the best markets. In Scranton—Wilkes-Barre, PA, for example, the monthly payment accounts for 32% of the typical renter’s income. A common rule for housing payments is that they should account for no more than 28% of a borrower’s monthly income. In three metros in the Top 10 Best Markets list, the monthly payment as a share of the median income for a renter is above that threshold.
Top 10 Best Markets for First-Time Buyers
California Is the Toughest Market for First-Time Buyers
The worst market for a first-time homebuyer is Los Angeles, where the monthly payment on a home priced at the 25th percentile would take up more than 100% of the typical renter’s income. Four other California metros are in the list of Worst Markets for First-Time Buyers: Oxnard-Thousand Oaks, San Diego, San Jose, and San Francisco.
Boston, MA and Bridgeport, CT are also tough, where renters would have to spend about 80% of their income to afford a home priced at the 25th percentile.
Salt Lake City is potentially a surprising member of the 10 Worst Markets list. In the second quarter of 2024, the 25th percentile home in the Salt Lake City metro area was priced at $599,500. The median renter income was $58,744, meaning they would need to devote 73% of their income each month in order to afford the 25th percentile home.
Top 10 Worst Markets for First-Time Buyers
What Should a First-Time Buyer Do?
Buyers in one of the more affordable markets will have more leverage on price and concessions. Inventory is still relatively tight in these markets, but sellers may be more likely to come down on price or offer closing cost or other assistance.
What if you are in one of the highest-cost markets? Is homeownership out of reach for prospective first-time buyers? Not necessarily, but it is definitely going to be challenging. First-time buyers in these markets need to have their finances in order and be prepared to make an offer when a home that works for them comes on the market.
How Attainable Is Your Market?
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