It’s no secret that the currently cut-throat housing market is frustrating many homebuyers. However, first-time homebuyers are facing the biggest challenges.
Built-In Challenges for First-Time Homebuyers
If the COVID pandemic has not been challenging enough, first-time homebuyers have almost implicit obstacles to overcome in our current overheated market.
Since first-time buyers are generally younger, their credit history and credit scores are generally less attractive to sellers. Compared with older, more experienced workers/homebuyers, their job history is tends to be shorter; their income tends to be lower, and their savings for a home deposit and an emergency fund tend to be less. Plus, first-time buyers are less likely than older, more experienced buyers to secure a loan or successfully compete in a bidding war.
The COVID pandemic and its impact on the housing market (low inventory, high prices, competitive bidding wars) have only amplified all these first-time buyer challenges.
NerdWallet’s Analysis of Home Market Impacts on First-Time Homebuyers
NerdWallet recently released its First-Time Home Buyer Metro Affordability Report. This analysis indicates how the housing market has impacted first-time homebuyers in 50 of the largest cities during Q2 2021.
Not only has low inventory (down -48% from Q2 2020!) been difficult, to say the least, rising prices have been a nightmare for first-time buyers.
Experts generally suggest that buyers think of affordability in terms of three…if a buyer earns $100,000, that buyer would likely qualify to buy a $300,000 home. BUT, in the 50 largest markets NerdWallet analyzed, list prices averaged 5.5 times the local median income of first-time buyers.
What’s Affordable and Where?
Here are the most and least affordable cities for first-time homebuyers, according to NerdWallet.
Most Affordable Cities for First-Time Buyers – 2021
Median Income Q2 List Price Affordability Ratio Pittsburgh $76,144 $270,226 3.5
St. Louis $75,373 $261,947 3.5
Cleveland $62,315 $226.418 3.6
Buffalo $65,447 $251,738 3.8
Hartford CT $83,465 $322,355 3.9
Baltimore $88,959 $322,355 3.9
Minneapolis $92,071 $366,852 4.0
Louisville KY $65,971 $277,346 4.2
Indianapolis $67,627 $282,317 4.2
Columbus OH $73,577 $310,496 4.2
Least Affordable Cities for First-Time Buyers – 2021
Denver $90,661 $595,013 6.6
Miami $65,952 $434,024 6.6
New York $95,136 $629,244 6.6
Salt Lake City $85,813 $573,973 6.7
Riverside CA $74,225 $523,861 7.1
Sacramento $78,882 $595,058 7.5
San Francisco $141,028 $1,075,156 7.6
San Jose CA $153,381 $1,289,190 8.4
San Diego $91,499 $843,311 9.2
Los Angeles $82,350 $1,072,201 13.0
Thanks to NerdWallet and The New York Times.