Indianapolis and Pittsburgh Named Best Markets for First-Time Home Buyers
Zillow's list of the best markets for first-time home buyers showcases places where there is less competition and affordable home prices.
Apr 27, 2016, 08:00 ET
SEATTLE, April 27, 2016 /PRNewswire/ -- Indianapolis, Pittsburgh, and Memphis, Tenn. are the best markets for first-time home buyers right now, Zillow announced today. Cleveland, Chicago, Houston, and Birmingham, Ala. also made the top 10.
To determine which markets are best for those looking to buy their first home, Zillow looked for places where it's more affordable to make a monthly mortgage payment than a monthly rental paymenti. Zillow also looked at median home values and competition, including how many homes the first-time buyer has to choose from and whether they are likely to be up against all-cash offers.
San Jose, Seattle and Austin are among the hardest places for first-time home buyers to get in the market – a conundrum for many young people who move to those cities because of their hot job markets, only to find a limited and unaffordable selection of starter homes to choose from.
"Buying your first home is a big decision that takes a lot of planning," said Zillow Chief Economist Dr. Svenja Gudell. "First-time buyers across the U.S. are up against high prices and low inventory, but these are the places where the availability of affordable, entry-level homes and the presence of cash-buyers are less of an issue. First-time buyers in these markets won't have to deal with as many bidding wars or run-away prices; they'll be able to find a first home that fits their needs with less stress. With record low mortgage rates, it's a good time to buy a home and certainly worth considering."
Zillow's Top 10 Best Markets for First-Time Home Buyers:
- Indianapolis
- Pittsburgh
- Memphis, Tenn.
- Cleveland
- Chicago
- Oklahoma City
- St. Louis
- Houston
- Tampa, Fla.
- Birmingham, Ala.
In Indianapolis, home buyers can expect to spend 11 percent of their income on a monthly mortgage payment, four percentage points less than the U.S. average. Renters, on the other hand, can expect to spend 26 percent of their income on monthly rent -- incentive for renters in Indianapolis to become homeowners.
All markets on the list except Chicago have a median home value below the national average. The U.S. Zillow Home Value Indexii is $186,200.
| Best Markets for First-Time Buyers |
Zillow Home Value Index (ZHVI) |
% Monthly Income for Mortgage Payment |
%Monthly Income for Rent |
Available Inventoryiii |
Cash Buyer Competitioniv |
| Indianapolis, IN |
$ 130,200 |
11.0% |
26.1% |
High |
n/a |
| Pittsburgh, PA |
$ 126,700 |
10.6% |
24.2% |
High |
Average |
| Memphis, TN |
$ 112,100 |
10.9% |
27.0% |
Average |
High |
| Cleveland, OH |
$ 125,500 |
11.0% |
26.2% |
High |
High |
| Chicago, IL |
$ 193,800 |
14.0% |
31.1% |
High |
Low |
| Oklahoma City, OK |
$ 132,500 |
11.0% |
25.6% |
Average |
Average |
| St. Louis, MO |
$ 141,900 |
11.2% |
23.4% |
High |
n/a |
| Houston, TX |
$ 172,100 |
12.5% |
30.5% |
Average |
n/a |
| Tampa, FL |
$ 163,600 |
15.2% |
32.2% |
High |
High |
| Birmingham, AL |
$ 128,000 |
12.0% |
26.7% |
High |
High |
| Worst Markets for First-Time Home Buyers |
Zillow Home Value Index (ZHVI) |
% Monthly Income for Mortgage Payment |
% Monthly Income for Rent |
Available Inventory |
Cash Buyer Competition |
| Salt Lake City, UT |
$ 234,400 |
16.2% |
26.4% |
Low |
n/a |
| Washington, DC |
$ 364,100 |
17.2% |
26.6% |
Average |
n/a |
| New York/Northern New Jersey |
$ 384,100 |
25.2% |
41.4% |
Average |
High |
| Austin, TX |
$ 247,500 |
16.9% |
30.7% |
Low |
n/a |
| San Jose, CA |
$ 956,500 |
42.6% |
41.2% |
Low |
Low |
| Los Angeles-Long Beach-Anaheim, CA |
$ 565,400 |
40.4% |
47.6% |
Low |
Low |
| Sacramento, CA |
$ 339,700 |
24.3% |
30.7% |
Low |
Low |
| San Francisco, CA |
$ 806,600 |
41.3% |
46.1% |
Low |
Low |
| San Diego, CA |
$ 506,100 |
33.0% |
40.3% |
Low |
Low |
| Seattle, WA |
$ 382,700 |
22.7% |
31.2% |
Low |
Low |
i Zillow determined affordability by analyzing the current percentage of a metro area's median income needed to afford the rent or the monthly mortgage payment on a median-priced home or apartment, and compared it to the share of income needed in the pre-bubble years between 1985 and 1999. For mortgage affordability, Zillow assumed a 20 percent down payment and a 30-year, fixed-rate mortgage at prevailing mortgage rates pulled from the Freddie Mac Primary Mortgage Market Survey. If the share of monthly income currently needed to afford the median-priced home or apartment is greater than it was during the pre-bubble years, that area is considered unaffordable for typical buyers or renters. Affordability data used in this analysis is from 2015 Q4.
ii The Zillow Home Value Index is the median estimated home value for a given geographic area on a given day and includes the value of all single-family residences, condominiums and cooperatives, regardless of whether they sold within a given period. It is expressed in dollars, and seasonally adjusted. ZHVI data used in this analysis is from March 2016.
iii Inventory is relative to other major metropolitan areas. Inventory data used in this analysis is from March 2016.
iv Cash buyer data not available for all metropolitan areas. Cash buyer data used in this analysis is from 2015 Q4.
SOURCE Zillow