This summer is likely to be a tough one for many first-time home hunters, given tight inventory levels and rising home values.
That may be particularly true for hot real estate markets such as San Francisco. Yet there are a number of U.S. cities where entry-level buyers can still get a foot in the door, according to new research from Zillow. These less competitive markets may have lower median home values, but they’re also forecast to show strong home values in the future, which will help first-time buyers build equity in their houses.
The real estate market has enjoyed a steady run-up in recent years, erasing the housing glut that depressed the market in the wake of the financial crisis. Builders turned their attention to constructing expensive, high-end homes, adding to inventory pressures for entry-level buyers. Home prices are expected to rise 4 percent this year, about the same as in 2016, according to the National Association of Realtors.
“As millennials reach the typical home buying age, they are coming into a tough housing market with low inventory and lots of competition,” said Zillow chief economist Dr. Svenja Gudell in a statement. “These markets have more favorable conditions for first-time buyers to become homeowners. More challenging metros aren’t out of reach for new buyers, but they should be prepared to face a more competitive buying environment.”
Some of the worst states for first-time homebuyers are located on the coasts, such as California, which ranked as the toughest state for entry-level buyers in a February survey from Bankrate.com. Interestingly, a few states with low housing values such as Mississippi were also considered difficult for first-time buyers because salaries in those areas are below the national median.
Finding the sweet spot of strong job growth and low housing costs may be key, but Zillow notes that first-time buyers are more likely to push beyond their budget than repeat buyers. It’s important to remember housing costs include property taxes, utilities and upkeep while bidding on a home, the company noted.
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