Best Housing Markets for First-Time Homebuyers – 2023 Study

A home purchase can serve as a building block for the homeowner’s financial life – and the circumstances of the local market can make or break the deal. First time homebuyers may look for a less competitive market to have a better chance of getting a realistic offer accepted. They also need affordability, to position themselves to grow their equity and a community within which to build a network.

To determine the best markets for first-time homebuyers, SmartAsset ranked 185 metro areas based on metrics measuring affordability, growth potential, competition and demographics.

Key Findings

• Texas is home to the nation’s top three best markets for first-time homebuyers. The Killeen, Wichita Falls and McAllen areas offer the best combination of affordability, housing inventory, growth potential and relaxed competition across the study. Waco and Brownsville also make the top 10.
• Illinois has some of the most affordable housing markets. The Springfield, Peoria, Decatur and Rockford areas have some of the most affordable payments, with median incomes ranging from 38% to 47.5% of the typical home value. However, these housing markets tend to be quite competitive.
• These Southern areas are projected to have the highest growth in home value over the next year. Home values in Tennessee (Knoxville, Johnson City), Georgia (Athens, Savannah) and North Carolina (Wilmington, Winston-Salem, Greenville) are expected to go up from 8.2% to 9.8% by July 2024.
• California, Oregon and Massachusetts have some of the worst markets for first time homebuyers. Housing markets like Napa, Oxnard, San Jose and Chico in CA; Medford and Portland, OR; and Boston and Springfield, MA are particularly expensive when compared with the median wages. And the few homes that do go for sale generally go under contract quickly.
• Homes in these Midwestern cities go under contract in just three days. Lexington, KY; Cincinnati, OH; and Fort Wayne, IN homes are on the market for the shortest time. In fact, the majority of housing markets with five days or less average on the market are in the Midwest, including Lafayette and Indianapolis, IN; Columbus, Cleveland and Toledo, OH; and Bloomington and Springfield, IL.

Top 10 Best Metros for First-Time Homebuyers

1. Killeen, TX

The Killeen metro area has the best combination of affordability, competition and growth, along with a reasonably young population. The median home price was $252,833 at the end of May 2023, while the median income sat at $63,458. As of the end of June 2023, nearly 3,000 homes were on the market each month on average.

2. Wichita Falls, TX

Wichita Falls is generally more affordable than Killeen with the average income ($58,523) totalling more than 31% of the median home price of $186,650. However, the inventory of homes is lower, with a projected 12-month value growth slightly lower at 6.8%, and a smaller population of people aged 25 to 39.

3. McAllen, TX

McAllen is situated on the U.S.-Mexico border and has a relaxed market with an average of 40 days until pending. The median home price is $210,833, while income averages $47,597. This population of 880,000 sees about 2,352 homes on the market in the average month.

4. St. Joseph, MO

Of the top 10 housing markets for first-time home buyers, the St. Joseph metro area is the most affordable when compared with the median income of $58,093. This accounts for just over 37% of the typical $156,500 home value. Homes here are only on the market for an average of five days. But the 7.7% projected 12-month growth makes a good incentive to place a bid.

5. Cape Coral, FL

Cape Coral has the highest number of active listings per person, and homes average 30 days from market listing to pending. The typical home value here is $350,292, which is roughly seven times median income ($70,364). And while these homes are projected to grow 6.2% in value over the next year, this community has a particularly low percentage of people aged 25 to 39 at 10.62% of the population.

6. Waco, TX

Homes in Waco are valued at $262,817 and the wage is just one quarter of that at $63,794. This metro area has roughly 280,000 people and there is an average of 1,325 homes on the market per month.

7. Huntsville, AL

Huntsville residents have the highest average income among the top 10 markets for first-time homebuyers at $81,734. Homes cost $294,550 on average and spend just 10 days active before going under contract. Home values are projected to grow by 8.3% by next summer.

8. Brownsville, TX

Homes in Brownsville take the longest to get under contract at 41 days, indicating an easier market for first-time homebuyers, despite a 6.6% projected growth in home prices over the next year. The average home value is $236,500, while residents average $51,098 in annual income.

9. Green Bay, WI

The Green Bay metro area has an average of 1,006 homes on the market per month. These homes stay active for 35 days and cost an average of $270,167. Meanwhile, residents earn a median annual income of $70,784.

10. Jackson, TN

Jackson homes averaged $196,667 at the end of May 2023, with a projected 7.4% growth potential by next summer. Residents here have a median income of $55,421 per year and can expect a home to take about 17 days from a listing’s debut to get under contract.

Data and Methodology

This study examined 185 metro areas for which data was available. Cities were ranked based on four metrics, composed of:

• Affordability. Median sale price relative to median income.
  • Median sale price comes from Zillow (Smooth, All Homes, Monthly) for May 31, 2023.
  • Median income comes from the U.S. Census Bureau’s 1 Year ACS S1901. The data is from 2021, adjusted for wage growth 6.2% to June 2023 per FRED Average Hourly Earnings of All Employees, Private.

• Growth potential.
  • Zillow’s Home Value Forecast; All Home Forecast, 1 Year; Homes (SFR, Condo/coop), smoothed. 6/30/2024
• Competition.
  • Median days to pending, Zillow. 6/30/2023
  • Inventory per capita
    • Zillow: For-Sale Inventory, All Homes, Smoothed, Monthly
    • U.S. Census Bureau 1 year ACS 2021 DP05
• Social.
  • Population aged 25-39: US Census Bureau 1 year ACS 2021 S0101

Housing Tips

• Consider the benefits of renting. If you’re thinking buying a home, renting may actually be the better financial option. SmartAsset’s rent vs. buy calculator can help you compare the costs of renting vs. buying in a particular area so you can make an informed financial decision. The tool will tell you how many years you’ll need to live in your home to make buying the preferred choice.
• Shop around for interest rates. If you choose to buy, SmartAsset’s mortgage rate comparison tool shows you the rates currently being offered for both 15- and 30-year fixed rate mortgages, as well as different kinds of adjustable rate mortgages. Be sure to shop around for the best possible rate and do your due diligence before picking a lender.
• Talk with an advisor. A financial advisor can help you set a budget, save for a down payment and ensure your home purchase aligns with your overall financial plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you.

Questions about our study? Contact press@smartasset.com.

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