The Best Cities for First-Time Home Buyers

In recent years, the U.S. has become a nation of renters, with more households renting now than at any point since 1965. Although homeownership has historically been part of the American Dream, the lack of affordable housing nationwide puts this goal out of reach for many people. A combination of stagnant wages relative to inflation, rising construction costs, and increased student loan debt have contributed to a housing affordability crisis, especially in heavily urbanized economic centers such as New York and San Francisco.

Blanca Torres, a Real Estate and Economic Development Reporter at San Francisco Business Times, attributes the affordable housing crisis to rapid job creation. Torres explained, “The affordability crisis is driven by cities not building enough housing in response to job growth, which disproportionately hurts the lowest paid workers who get priced out first.”

Among these low-paid workers are young people such as millennials, many of whom are overburdened with student loan debt and still in the junior ranks of their career. According to data from the American Community Survey, the average income for full-time workers ages 27-37 is $55,462, which is too low to afford a home in many metro areas.

According to Torres, “Many millennials can’t afford to buy a home until much later in life than previous generations—if they can at all. Millennials aren’t waiting to purchase homes for social reasons but because of economic reasons: homes are more expensive, home price increases have far outpaced wage increases, and the share of entry-level or starter homes is drying up in many markets.”

Despite these negative economic trends in the national housing market, there is some indication that things are looking up. Census data shows that after a long decline beginning in 2004, the homeownership rate for individuals under 35 is starting to rise. As of Q4 2018, 36.5 percent of Americans under the age of 35 own a home—up from a low of 34.1 percent in Q2 2016.

To find which cities are most affordable for first-time home buyers, Construction Coverage used data from Zillow, the American Community Survey, and the Bureau of Economic Analysis. Its researchers created a composite score based on home affordability, projected home value growth, and cost of living. See the Methodology section for a detailed breakdown of the data used in the score.

Construction Coverage looked only at metro areas in which data from Zillow were included. Metros were grouped by population into the following categories:

• Large metros: more than 1,000,000
• Midsize metros: 350,000 – 1,000,000
• Small metros: less than 350,000

Takeaways

According to the Zillow Home Price Index, the median home price in the U.S. is $226,300 and the projected one-year change in home value is 5.1 percent. However, home prices (and salaries) vary significantly across different locations. States and cities in the Northeast and the West Coast usually have higher salaries, but housing inventory is comparatively scarce and therefore commands disproportionately higher prices. Instead, the best states for homeownership tend to be located in the South and Midwest due to lower housing and living costs compared to incomes.

The chart below shows the results for small and midsize cities, underscoring that the South and Midwest are optimal locations for first-time home buyers.

The final analysis only includes the results for large cities. Here are the most affordable large cities for first-time home buyers.

The Best Large Metros for First-Time Home Buyers

20. Dallas-Fort Worth-Arlington, TX

• First-time home buyer score: 72.48
• Median home price: $244,400
• Estimated monthly mortgage payment: $960
• Projected home value growth (YoY): 7.1%
• Average income (full-time workers age 27-37): $56,238
• Cost of living: About average

Located in north Texas, the Dallas-Fort Worth-Arlington metro area is known for its sports teams, historical museums, and live music. The Stockyards National Historic District offers an immersive experience in traditional cowboy culture and features daily cattle drives, shops for cowboy gear, and live rodeos. The cost of living in the Dallas-Fort Worth metro area is comparable to the national average, and the median home price is $244,400—about 10 percent above the national median.

19. Houston-The Woodlands-Sugar Land, TX

• First-time home buyer score: 73.48
• Median home price: $206,300
• Estimated monthly mortgage payment: $810
• Projected home value growth (YoY): 3.9%
• Average income (full-time workers age 27-37): $57,471
• Cost of living: 2% above average

Like its northern neighbor Dallas-Fort Worth, Houston is becoming a hotbed for new homeowners due to its low housing prices and a plethora of things to do. Most residents in Houston will need a car to get around due to the city’s sprawling size. With the city’s proximity to Galveston Bay, Houston residents can enjoy a variety of water sports, beach activities, and boating to escape the hot summer days. In addition, Houston is the only metro area on the list where the cost of living is above average, even though the median home prices and estimated monthly mortgage payments are below average.

18. Jacksonville, FL

• First-time home buyer score: 74.13
• Median home price: $213,900
• Estimated monthly mortgage payment: $840
• Projected home value growth (YoY): 7.0%
• Average income (full-time workers age 27-37): $51,368
• Cost of living: 4% below average

Jacksonville is the largest city by area in the continental U.S. and offers plenty of opportunities for work/life balance. For example, Jacksonville boasts the largest park system in North America, with more than 300 public and recreational spaces. In addition, the city’s proximity to numerous beaches is perfect for residents who love to soak up the sun. For those who prefer indoor activities, Jacksonville has a vibrant arts scene, especially at the Museum of Contemporary Art, the Ritz Theatre, and the Florida Theatre. The median home price in Jacksonville is$213,900, and the projected home value growth is greater than the national average.

17. Atlanta-Sandy Springs-Roswell, GA

• First-time home buyer score: 74.85
• Median home price: $218,600
• Estimated monthly mortgage payment: $859
• Projected home value growth (YoY): 7.2%
• Average income (full-time workers age 27-37): $53,680
• Cost of living: 4% below average

The state capital of Georgia, Atlanta combines urban amenities with traditional Southern charm. Special events like the Atlanta Film Festival and Music Midtown offer outdoor entertainment, while locales like Piedmont Park and the Georgia Aquarium are perfect year-round for residents of all ages. Nearby Sandy Springs and Roswell have a more suburban feel. The greater Atlanta area has the highest projected home value growth on this list at 7.2 percent.

16. Grand Rapids-Wyoming, MI

• First-time home buyer score: 75.09
• Median home price: $191,600
• Estimated monthly mortgage payment: $753
• Projected home value growth (YoY): 5.3%
• Average income (full-time workers age 27-37): $51,542
• Cost of living: 7% below average

This Midwest city is known for its public art, snowy winters, and expanding craft beer scene. Attractions in Grand Rapids include Frederik Meijer Gardens, the Grand Rapids Art Museum, the Grand Rapids Ballet, and Beer City Ale Trail tours. The city’s proximity to Lake Michigan also offers ample opportunities for outdoor recreation. The cost of living is 7 percent below average, and the median home price of $191,600 is well below the national median.

15. Charlotte-Concord-Gastonia, NC-SC

• First-time home buyer score: 75.72
• Median home price: $207,600
• Estimated monthly mortgage payment: $816
• Projected home value growth (YoY): 6.6%
• Average income (full-time workers age 27-37): $53,636
• Cost of living: 7% below average

The most populous city in North Carolina, Charlotte has a cost of living 7 percent below average and a median home price of $207,600. Charlotte is home to cultural attractions including the Blumenthal Performing Arts Center, the Mint Museum, and the Levine Museum of the New South. College basketball fans can cheer on the University of North Carolina Tar Heels or the Duke University Blue Devils. For residents who prefer to play sports rather than watch them, Park Road Park features basketball courts, baseball fields, volleyball courts, tennis courts, and other opportunities for outdoor fun.

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14. Louisville/Jefferson County, KY-IN

• First-time home buyer score: 76.91
• Median home price: $161,300
• Estimated monthly mortgage payment: $634
• Projected home value growth (YoY): 3.4%
• Average income (full-time workers age 27-37): $50,391
• Cost of living: 9% below average

Despite being home to the Kentucky Derby, there’s much more to Louisville than horse racing. The city also hosts a thriving arts and culture scene with the Humana Festival of New American Plays, the St. James Court Art Show, and numerous art galleries. Residents also enjoy visiting Louisville Waterfront Park and Jefferson Memorial Forest. College sports fans can cheer on the Kentucky Wildcats and the Louisville Cardinals. The cost of living in Louisville is 9 percent below average, and the median home price of $161,300 is also well below the national median.

13. Kansas City, MO-KS

• First-time home buyer score: 78.10
• Median home price: $192,800
• Estimated monthly mortgage payment: $757
• Projected home value growth (YoY): 6.3%
• Average income (full-time workers age 27-37): $54,333
• Cost of living: 6% below average

Kansas City is situated along the Kansas and Missouri Rivers in the heart of the Great Plains. Fun activities include visiting the Nelson-Atkins Museum of Art, the Kemper Museum of Contemporary Art, the Kansas City Art Institute, and the American Jazz Museum. Kansas City is also home to the historic City Market, the region’s largest farmers market. The cost of living in Kansas City is 6 percent below average and the median home price is $192,800.

12. Columbus, OH

• First-time home buyer score: 78.13
• Median home price: $190,900
• Estimated monthly mortgage payment: $750
• Projected home value growth (YoY): 5.1%
• Average income (full-time workers age 27-37): $55,745
• Cost of living: 7% below average

The most populous city in Ohio, Columbus has a lot to offer first-time home buyers. The bustling Short North Arts District is filled with restaurants, shops, concert halls, art galleries, and public markets. The city is also home to the Center of Science and Industry museum, the Columbus Zoo and Aquarium, and the Scioto Mile riverfront park. Columbus residents are also avid fans of the Ohio State Buckeyes and regularly watch college football games.

11. Buffalo-Cheektowaga-Niagara Falls, NY

• First-time home buyer score: 79.98
• Median home price: $158,700
• Estimated monthly mortgage payment: $623
• Projected home value growth (YoY): 4.2%
• Average income (full-time workers age 27-37): $50,323
• Cost of living: 6% below average

Buffalo is known for more than its cold, snowy winters. Despite being the second-largest city in New York, Buffalo maintains a small-town feel with close-knit neighborhoods. Buffalo residents enjoy skiing, hiking, attending art galleries, taking a ride to nearby Niagara Falls, or crossing the border into Canada for a long weekend. The projected home value growth in the greater Buffalo area is below the national average, but median home prices are also about $60,000 less than the national median.

10. St. Louis, MO-IL

• First-time home buyer score: 80.07
• Median home price: $167,100
• Estimated monthly mortgage payment: $656
• Projected home value growth (YoY): 3.9%
• Average income (full-time workers age 27-37): $53,747
• Cost of living: 9% below average

Situated along the Mississippi River and home to the famous Gateway Arch, this Midwest city balances a low cost of living with the trappings of city life. St. Louis is home to Forest Park, the Saint Louis Art Museum, the St. Louis Zoo, and the Missouri Botanical Garden. Three national research universities—University of Missouri-St. Louis, Washington University in St. Louis, and Saint Louis University—give St. Louis a college town atmosphere as well. The cost of living in St. Louis is 9 percent below average and the median home price is $167,100, putting this city in reach for many first-time buyers.

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9. Rochester, NY

• First-time home buyer score: 80.38
• Median home price: $144,400
• Estimated monthly mortgage payment: $567
• Projected home value growth (YoY): 1.8%
• Average income (full-time workers age 27-37): $51,887
• Cost of living: 2% below average

Located in upstate New York, Rochester is an ideal place for residents who enjoy winter sports. Skiing and sledding are popular activities during the winter, while outdoor festivals, amusement parks, and water activities on Lake Ontario are perfect for the spring and summer. The median home price of $144,400 is great for first-time buyers. The projected home value growth of 1.8 percent year-over-year is on the low side though.

8. Oklahoma City, OK

• First-time home buyer score: 80.74
• Median home price: $146,600
• Estimated monthly mortgage payment: $576
• Projected home value growth (YoY): 2.5%
• Average income (full-time workers age 27-37): $52,235
• Cost of living: 8% below average

Oklahoma City is the capital of Oklahoma and is known for its cowboy history, horse shows, and thriving livestock market. Attractions include the Oklahoma City Museum of Art, the National Cowboy & Western Heritage Museum, and the H&8th Night Market. Similarly, the annual Oklahoma State Fair showcases numerous food vendors, live shows, competitions, and live music. The median home price of $146,600 is affordable for many people in their late 20s to early 30s.

7. Memphis, TN-MS-AR

• First-time home buyer score: 82.99
• Median home price: $139,600
• Estimated monthly mortgage payment: $548
• Projected home value growth (YoY): 4.9%
• Average income (full-time workers age 27-37): $45,268
• Cost of living: 9% below average

There’s more to Memphis than Graceland. This Southern city is steeped in art, music, and civil rights history. Beale Street is the center of live music in Memphis, while the Orpheum Theatre offers a variety of performances for residents to attend. Other attractions include the National Civil Rights Museum, the Memphis Zoo, and the Brooks Museum. Memphis has the lowest median home price on this list, with an estimated monthly mortgage of just $548.

6. Cincinnati, OH-KY-IN

• First-time home buyer score: 83.07
• Median home price: $169,900
• Estimated monthly mortgage payment: $667
• Projected home value growth (YoY): 5.9%
• Average income (full-time workers age 27-37): $53,852
• Cost of living: 10% below average

Located in southern Ohio on the Kentucky and Indiana borders, Cincinnati features low housing prices, opportunities for fun activities, and many options for work and education. The city’s proximity to the Ohio River offers recreational activities like jet skiing, walking paths, and riverboat tours. Residents of all ages can enjoy the Cincinnati Zoo & Botanical Garden, Cincinnati Art Museum, Music Hall, and the Riverbend Music Center. The cost of living in Cincinnati is 10 percent below average, and home values are poised to grow 5.9 percent year over year.

5. Birmingham-Hoover, AL

• First-time home buyer score: 83.08
• Median home price: $145,400
• Estimated monthly mortgage payment: $571
• Projected home value growth (YoY): 3.9%
• Average income (full-time workers age 27-37): $50,307
• Cost of living: 11% below average

The historical city of Birmingham offers a thriving cultural scene, sports games, and outdoor adventure. Residents can enjoy camping at Oak Mountain, skating at Railroad Park, or zip lining at Red Mountain. College football rivalry is fierce, with both Alabama State University and Alabama A&M University located in the surrounding area. The city also hosts a variety of theaters, art galleries, shops, and restaurants. Birmingham has the lowest cost of living on this list, at 11 percent below average.

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4. Cleveland-Elyria, OH

• First-time home buyer score: 84.18
• Median home price: $146,300
• Estimated monthly mortgage payment: $575
• Projected home value growth (YoY): 4.1%
• Average income (full-time workers age 27-37): $52,481
• Cost of living: 10% below average

Situated on the banks of Lake Erie, Cleveland is home to the Rock and Roll Hall of Fame, the Cleveland Clinic, and Case Western Reserve University. Clevelanders can enjoy the galleries in the Gordon Square Arts District, craft beer at the Great Lakes Brewing Company, or baseball games at Progressive Field (home to the Cleveland Indians baseball team). Those who enjoy nature can also stroll through the city’s Metroparks. The cost of living in Cleveland is 10 percent below the U.S. average, and the median home price is $146,300.

3. Indianapolis-Carmel-Anderson, IN

• First-time home buyer score: 84.99
• Median home price: $165,600
• Estimated monthly mortgage payment: $650
• Projected home value growth (YoY): 7.0%
• Average income (full-time workers age 27-37): $53,256
• Cost of living: 7% below average

Indianapolis might be synonymous with NASCAR, but this charming Midwestern city has much more to offer. Known by the locals as “Indy,” the city is home to a children’s museum, Eagle Creek Park, and a variety of cultural festivals. An added benefit is that the city is highly walkable. The 8-mile Indianapolis Cultural Trail connects the city’s cultural attractions with different neighborhoods. The cost of living is 7 percent below average.

2. Detroit-Warren-Dearborn, MI

• First-time home buyer score: 85.73
• Median home price: $161,300
• Estimated monthly mortgage payment: $634
• Projected home value growth (YoY): 5.5%
• Average income (full-time workers age 27-37): $55,101
• Cost of living: 4% below average

The largest city in Michigan, Detroit is known for its vast music scene and its history as a major automobile manufacturing hub. The city hosts music events including the Detroit International Jazz Festival, the Detroit Electronic Music Festival, and the Motor City Music Conference (MC2). In addition, the Detroit cultural scene includes the Detroit Institute of Arts, the Detroit Historical Museum, Charles H. Wright Museum of African American History, and the Motown Historical Museum. The median home price is only $161,300, and the average income of young, full-time workers is just slightly below the national average.

1. Pittsburgh, PA

• First-time home buyer score: 86.20
• Median home price: $144,400
• Estimated monthly mortgage payment: $567
• Projected home value growth (YoY): 3.6%
• Average income (full-time workers age 27-37): $59,065
• Cost of living: 6% below average

In recent years, Pittsburgh has become a great destination for first-time home buyers because of its above average incomes, low housing prices, and urban atmosphere. Shedding much of its former reputation as the City of Steel, Pittsburgh today is better known for its lively culture. Residents frequent events like the Three Rivers Arts Festival, galleries like the Andy Warhol Museum, and home games for the Pittsburgh Steelers. Pittsburgh has the highest average income on this list, at $59,065, and a median home price of $144,400.

Methodology & Full Results

The home price and forecast data used in the analysis are from Zillow. The median home price is the ZIllow Home Price Index accessed in April of 2019. The estimated monthly mortgage payment is based on the Zillow Home Price Index and assumes a 30-year fixed mortgage, a 20 percent down payment, and 4.24 percent interest rate.

The average income for full-time workers between the ages of 27 and 37 was calculated using the U.S. Census Bureau 2017 American Community Survey 1-Year PUMS data. For this calculation, full-time workers are defined as those working 35 hours or more each week for at least 48 weeks that year.

For each metro, an affordability gap was calculated as the percentage difference between what buyers between the ages of 27 and 37 could afford and the Zillow Home Price Index. This assumes those buyers spend no more than 28 percent of their gross monthly income on their mortgage. Cost of living data is from the U.S. Bureau of Economic Analysis.

The first-time home buyer score is a composite score based on the following metrics:

• Home affordability gap: 70%
• Projected home value growth: 20%
• Cost of living: 10%

Only metropolitan areas with data from Zillow were included. Metros were grouped by population into the following groups:

• Large metros: more than 1,000,000
• Midsize metros: 350,000 – 1,000,000
• Small metros: less than 350,000