Competition for starter homes is intense. What’s a buyer to do? Look to these cities to break into the real estate market.
Competition for starter homes is intense. What’s a buyer to do? Look to these cities to break into the real estate market.
Who wants to buy a home? A lot more people than there are homes to buy, and the outlook for first-time buyers is particularly grim.
About 26 million Americans plan to buy a home in the next 12 months, but just 5-6 million homes were sold in each of the past five years, according to a NerdWallet survey conducted in December 2021.
Millennials, aged about 26-41 years, are the largest group trying to buy homes, about 37%, according to the National Association of Realtors, and first-time buyers made up 31% of all home buyers. The supply of starter homes decreased by more than half from 2017-2021, according to an analysis by Realtor.com, which defined starters as single-family homes, condos, and townhomes under 1,850 square feet.
While median monthly asking rent in the U.S. surpassed $2,000 in May, the national median sale price topped $431,000, according to Redfin data.
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And it’s not just low inventory and high prices, the competition is fierce for first-time homebuyers. Urban renters headed for the suburbs during the pandemic to compete for those entry-level homes, baby boomers looking to downsize also go after smaller properties, and to make matters worse, first-time home buyers must compete with investors who pay cash to fix and flip homes. These cash-rich flippers now make up about 10% of homebuyers.
Lastly, builders have largely been unable to offset the decline in starter homes.
For the house hunter who still has the moxie to try, turn to this list of cheapest cities to buy a home. To find the cheapest places for homebuyers and the best places for starter homes, StorageCafe, an online platform that provides storage unit listings across the nation, looked at data from 108 U.S. cities with populations ranging from 90,000 to 8 million. The metrics include property values, number of sales between 2015 and 2021, housing affordability, cost of living, unemployment rate, homebuyers’ ages, the ratio of renters to owners, income levels, FHA lending limits and average mortgage rates. They scored each city on these metrics then ranked them based on their potential with regard to starter homes.
Here are the best cities for first-time homebuyers:
1. Fort Wayne, Ind.Median property value: $113,144Cost of living index: 87Homebuyers’ age: 352021 average mortgage rate: 3.14%The analysis used average mortgage rates from 2021, and rates have since gone up, hovering near 6% in June, but last year’s rates might still give you a sense of where rates tend to be lower.
2. Columbia Md.Median property value: $264,055Cost of living index:106Homebuyers’ age: 392021 average mortgage rate: 3.00%Shutterstock
3. PittsburghMedian property value: $170,042Cost of living index:104Homebuyers’ age: 382021 average mortgage rate: 3.03%4. Fishers, Ind.Median property value: $258,679Cost of living index: 92Homebuyers’ age: 382021 average mortgage rate: 3.14%aceshot1 / Shutterstock
5. Columbus, OhioMedian property value: $164,229Cost of living index: 92Homebuyers’ age: 392021 average mortgage rate: 3.16%6. Carmel, Ind.Median property value: $244,670Cost of living index: 104Homebuyers’ age: 402021 average mortgage rate: 3.01%7. St. Paul, Minn.Median property value: $286,151Cost of living index: 92Homebuyers’ age: 382021 average mortgage rate: 3.14%8. Cary, N.C.Median property value: $308,611Cost of living index: 94Homebuyers’ age: 432021 average mortgage rate: 3.02%9. Manchester, N.H.Median property value: $276,257Cost of living index: 111Homebuyers’ age: 402021 average mortgage rate: 3.03%10. MinneapolisMedian property value: $288,926Cost of living index: 105Homebuyers’ age: 402021 average mortgage rate: 3.01%f11photo / Shutterstock
11. Nashville, Tenn.Median property value: $318,046Cost of living index: 93Homebuyers’ age: 392021 average mortgage rate: 3.02%12. Bakersfield, Calif.Median property value: $216,063Cost of living index: 102Homebuyers’ age: 402021 average mortgage rate: 3.04%13. Arvada, Colo.Median property value: $476,672Cost of living index: 114Homebuyers’ age: 392021 average mortgage rate: 3.00%Shutterstock
14. Alexandria, Va.Median property value: $432,703Cost of living index: 137Homebuyers’ age: 402021 average mortgage rate: 2.99%15. Centennial, Colo.Median property value: $444,747Cost of living index: 114Homebuyers’ age: 392021 average mortgage rate: 3.00%16. DenverMedian property value: $505,777Cost of living index: 113Homebuyers’ age: 392021 average mortgage rate: 3.00%17. Raleigh, N.C.Median property value: $279,304Cost of living index: 94Homebuyers’ age: 432021 average mortgage rate: 3.02%18. Germantown, Md.Median property value: $261,511Cost of living index: 157Homebuyers’ age: 392021 average mortgage rate: 3.00%19. St. Petersburg, Fla.Median property value: $283,684Cost of living index: 96Homebuyers’ age: 532021 average mortgage rate: 3.11%20. Lakewood, Colo.Median property value: $380,165Cost of living index: 114Homebuyers’ age: 392021 average mortgage rate: 3.00%21. Aurora, Colo.Median property value: $360,542Cost of living index: 114Homebuyers’ age: 392021 average mortgage rate: 3.00%22. Boca Raton, Fla.Median property value: $280,104Cost of living index: 116Homebuyers’ age: 512021 average mortgage rate: 3.11%Shutterstock
23. Modesto, Calif.Median property value: $319,328Cost of living index: 119Homebuyers’ age: 392021 average mortgage rate: 3.04%Shutterstock
24. Chandler, Ariz.Median property value: $388,450Cost of living index: 103Homebuyers’ age: 512021 average mortgage rate: 3.12%25. Las VegasMedian property value: $265,170Cost of living index: 107Homebuyers’ age: 502021 average mortgage rate: 3.11%26. Washington, D.C.Median property value: $623,135Cost of living index: 157Homebuyers’ age: 402021 average mortgage rate: 4.90%27. Scottsdale, Ariz.Median property value: $478,609Cost of living index: 103Homebuyers’ age: 512021 average mortgage rate: 3.12%28. Spokane, Wash.Median property value: $300,881Cost of living index: 107Homebuyers’ age: 442021 average mortgage rate: 3.06%29. Peoria, Ariz.Median property value: $373,588Cost of living index: 103Homebuyers’ age: 512021 average mortgage rate: 3.12%30. Gilbert, Ariz.Median property value: $409,324Cost of living index: 103Homebuyers’ age: 512021 average mortgage rate: 3.12%31. Portland, Ore.Median property value: $484,475Cost of living index: 132Homebuyers’ age: 442021 average mortgage rate: 3.08%Check out how all 108 cities ranked and see the methodology for this study at StorageCafe.com