Thinking of buying your first home? While moving across the country for better prices is not necessarily your wisest move, some parts of the United States make it a lot easier for young and first-time buyers to break into the market.
A new report from SmartAsset identified the top 10 American cities best-suited for a first-time buyer. By looking at factors such as payment-to-income ratios and five-year appreciation trends, the report finds that smaller cities within driving distance of a major urban center tend to fare the best overall.
“Even after qualifying for a mortgage and covering the down payment and closing costs, first-time homeowners must consider their comprehensive financial situation and whether they will be able to make the monthly mortgage payments,” reads the report. “First-time buyers may also want to consider certain city-specific factors such as entertainment options, commute times and job opportunities.”
Here are the cities identified as having the best economic outlook for first-time buyers:
1. Grand Rapids, Michigan
As the second-largest city in Michigan, Grand Rapids has multiple factors that any young buyer needs: relatively low prices and a steady stream of jobs due to its status as a hub for health industry professionals. Coupled with it being a few hours from cities like Chicago and Detroit, it tops the list of the best destinations for first-time buyers.
“In the categories of affordability and employment, Grand Rapids ranks within the best 50 out of all 185 cities for four metrics: high under-45 homeownership rate (40.73 percent), low down payment-to-income ratio (0.60), low housing costs as a percentage of income (20.31 percent) and low July 2020 unemployment rate (8.7 percent).
2. Henderson, Nevada
Twenty minutes outside of Las Vegas, Henderson is a popular choice for those who work in the entertainment industry and need to remain close to the center. Young people, in particular, find that the prices are affordable enough to make that first leap into homebuying even if, at the moment, the coronavirus pandemic is leaving many out of work struggling.
“A high percentage of young residents in Henderson, Nevada, are homeowners,” the report states. “The city has the 24th-highest under-45 homeownership rate, at 46.34 percent. Henderson additionally ranks in the top 25 cities for three other metrics.”
3. Virginia Beach, Virginia
While the name suggests a quaint beach town, Virginia Beach is actually the most populous city in the state. Like with Henderson, the city is highly dependent on its tourism and entertainment industry due to the large flock of beachgoers who descend into town every summer. While the coronavirus could put a long-term dent in the types of jobs the city offers, the quality of life in Virginia Beach is still considered one of the best in the country.
“Regarding employment, Virginia Beach had the 28th-lowest July 2020 unemployment rate (7.8 percent) and the 72nd-highest five-year change in median household income (almost 23 percent) across all 185 cities in the study,” the report states.
4. Boise, Idaho
The capital of Idaho is particularly popular among young couples trying to start a family — the five-year appreciation rate was 65 percent, the foreclosure rate is very low while the number of people under 45 who own a home is higher than in most other parts of the country.
“Bureau data from 2018 shows that almost 46 percent of Boise households led by individuals younger than age 45 own their house or apartment,” reads the report.
Boise, Idaho. Credit: Darwin Fan and Getty Images
5. Fort Wayne, Indiana
Historic and homey, Fort Wayne attracts young buyers by its affordability. The cost of a median house is only 18 percent of the median household income while, in certain cities in California, that number can top 100 or even 200 percent. As a result, many are able to make the leap from renting to buying without saving for years or having to rely on help from family members for a down payment.
“Additionally, the 2018 down payment-to-income ratio is 0.48, the 11th-best in our study,” reads the report. “What’s more, many other young individuals have been able to move from renting to homeownership.”
6. St. Petersburg, Florida
A popular vacation destination, Florida’s St. Petersburg is also known as a spot where people can buy a home without breaking the bank. It is still relatively affordable even as, from 2013 to 2018, prices rose by more than 70 percent. The good weather and job options within driving range attract many even if overall livability is lower than in many of the other above-listed cities.
“Homeowners here also generally contend with lower monthly housing costs,” reads the report. “Median annual housing costs for owners make up less than 22 percent of the city’s median household income.”
7. Omaha, Nebraska
While not New York or Los Angeles, the capital of Nebraska has many draws for couples hoping to get a start in life — as a hub for many agricultural and food processing plants, jobs are plentiful and stable while the home prices remain affordable. Between 2013 and 2018, the median household income also rose by nearly 25 percent.
“Omaha, Nebraska ranks 31st for the category of livability and 11th for the category of employment,” reads the report. “Regarding job opportunities, incomes are rising in the area and unemployment has remained relatively low during COVID-19.”
Enrique Macias on Unsplash
8. Garland, Texas
Over the last decade, all of Texas has seen an explosion in job opportunities and significant economic growth. Many young professionals choose to settle in cities that, like Garland, remain affordable but are still within a thirty-minute drive of a major city like Dallas.
“Census data from 2018 shows that the ratio between the median valued home and median annual rent in Garland was 12.62, the 27th-best in our study,” the report states. “Additionally, between 2013 and 2018, the median home value increased by about 56 percent, the fourth-highest increase of any city in our top 10 and 44th-highest overall.”
9. Gilbert, Arizona
Topping the list as the most affordable city on this list, Arizona’s Gilbert is a mecca for young buyers —nearly 70 percent of its homeowners are under 45. Payment-to-income ratio is at 0.70, housing costs in relation to income are at 19.25 percent while and property tax rate is at 0.60 percent.
“Across all three metrics in that category – price-to-rent ratio, five-year home value appreciation and foreclosure rate – Gilbert ranks in the top half of cities,” reads the report.
10. Sioux Falls, South Dakota
The most populous city in South Dakota, Sioux Falls ranks highly compared to affordability and overall quality of life. While incomes and job opportunities are fairly stagnant, people who move here tend to buy a home right away, find a community and love the laid-back feel.
“Across specific metrics, Sioux Falls has the second-lowest average commute time (less than 17 minutes) and the 13th-highest under-45 homeownership rate (about 53 percent) overall,” reads the report. “The state of South Dakota has the fifth-lowest foreclosure rate overall, at 0.16 per 10,000 homes.”
