Midwest Tops List of Best Markets for First-Time Homebuyers
Bloomington, Illinois, and Iowa City, Iowa, are the best markets in the U.S. for first-time homebuyers, according to a Thursday report by realtor.com that ranked cities by affordability, inventory, and other factors such as job opportunities.
The metro area around No. 1 Bloomington, a small city about 135 miles south of Chicago, had a March median home price of $160,000, and a December unemployment rate of 5.3%, lower than the 6.7% U.S. average for the month. In No. 2 Iowa City, home to Procter & Gamble and the University of Iowa, the median price was $305,000, and the unemployment rate was 2.7%.
In both cities, there were at least 10 active listings per 1,000 households and the average commute time to work was about 20 minutes, the report said.
Home prices have surged during the pandemic as low interest rates made it possible for buyers to qualify for bigger mortgages. While that has made it tougher for first-timers to purchase a home, many of them have gained the flexibility to move to other areas of the country as employers let more people work from home, the report said.
“First-time buyers looking for an affordable home as well as job opportunities and quality of life may have to bypass major urban cities for more rural, secondary cities as the competition heats up for finding a home,” the report said.
Four of the top five markets were in the Midwest region of the U.S., according to the report. The No. 3 market was Kalamazoo, Michigan, No. 4 was Great Falls, Montana, and No. 5 was Eau Claire, Wisconsin.
“While relocating isn’t an option for everyone, the pandemic has caused many to rethink their priorities, including where they want to live,” said Danielle Hale, chief economist at realtor.com. “This analysis was meant to provide some insight for those who are open to expanding their search as they weigh their homeowner options.”
All of the top 10 best markets in the report had median home prices below the national median of $370,000, the report said. Kalamazoo had the lowest median, at $155,000, and Taylorsville, Utah, ranked No. 8, had the highest at $350,000.
“With 50% fewer homes on the market this year than last, the U.S. housing market is competitive for all buyers,” Hale said. “First-time buyers are at a bigger disadvantage since they don’t have the funds from a previous home sale to help with their down payment or compete with bidding wars.”
Nine of the 10 top cities are home to at least one four-year college or university, contributing to the fact that their residents tend to skew younger than the country overall, the report said.
Savannah, Ga., the No. 6 market for first-time buyers, has the largest share of residents aged 25 to 34, accounting for 17% of the city’s population, the report said. The city is home to four colleges and universities, including Savannah State University. The city’s median home price in March was $275,000.
Schenectady, N.Y., was the No. 7 market, with a median home price of $210,000.
At the bottom of the list, No. 9 Harrisonburg, Virginia, had a March median home price of $265,000 and a December unemployment rate of 4%. Rapid City, South Dakota, No. 10, had a median of $281,000 and a 3.2% unemployment rate.