Where Are the Best Metros for First Time Buyers?

A recent DSnews report highlights the best metros areas for renters looking to purchase a home. An increase in demand, low mortgage rates, low inventory, and millennials aging into homeownership has made it difficult for first-time homebuyers, who are mostly current renters. Odeta Kushi, the First American Chief Economist, stated “The nearly two-thirds of American households who already own homes saw their equity increase, while potential first-time homebuyers, who are nearly always renters, missed out. While low mortgage rates increase house-buying power and thus improve affordability for potential first-time buyers, low rates also boost demand and, in a supply-restricted market, accelerate house price appreciation, which in turn reduces affordability. Nationally in 2020, this tug-of-war resulted in higher purchasing power, but a smaller share of affordable homes for first-time buyers”. Kushi also notes that renters’ home buying power has increased 10% in the last year. She believes the increase is due to the large drop in mortgage rates. In addition, Kushi states that while home-buying power has increased, the amount of homes that a renter can afford has decreased. Kushi includes a breakdown of homebuyer’s purchasing power in different regions.

WHERE ARE THE AFFORDABLE HOMES FOR RENTERS TO PURCHASE?

According to the report, the most affordable city for renters to purchase their first home is Oklahoma City. The median renter could afford 86% of the homes for sale. In 2020, the median home price in Oklahoma City was $184,000 and the median renter’s house-buying power was $329,000. The least affordable city is Los Angeles. In 2020, the median home price was $737,000, where the median renter’s house-buying power was $373,000. Only roughly 7% of homes for sale in Los Angeles are affordable for first-time buyers.

Click here to read the full DSnews report and learn more!

Click here to read Odeta Kushi’s report and learn more!