The 2017 Best Places to Live rankings aim to help people determine where they should live in the U.S. based on dozens of data points incorporating cost of living, job market, crime rates, commutes and more.
Of course, it’s a given that personal preference also comes into play when finding your perfect next city, in addition to specific circumstances — such as the industry you work in or whether you’re starting a family — that may change how you weigh different pieces of information.
Last month, real estate information company Zillow took a stab at ranking which of the 50 largest markets in the U.S. would be most ideal for first-time homebuyers, and it released a report noting the 10 best and worst markets for this group.
[See: 7 Things First-Time Homebuyers Wish They’d Known.]
Zillow based its calculations on five metrics: a lower median home value; strong home value forecast; high inventory-to-household ratio; buying being more lucrative than renting; and a less competitive market based on the share of active listings that see price cuts. The top 10 list includes Memphis, Tennessee; Oklahoma City; Tampa, Florida; Las Vegas and San Antonio. You can see the full list here.
While other markets may offer more to homebuyers on a case-by-case basis, the conditions in these cities make it easier to purchase a house without already having equity built up in another home. For example, the Zillow report notes that a 5 percent down payment in the San Francisco Bay Area is larger than a 20 percent down payment in most markets in the top 10.
So what else makes these markets great for first-time homebuyers? We zoomed in on three metro areas to see what they offer and what challenges buyers may face when jumping into homeownership for the first time.
[See: 7 Things You Can Do to Win a Bidding War.]
Memphis
Zillow’s Most Favorable to First-Time Homebuyers Ranking: 1
U.S. News Best Places to Live 2017 Ranking: 93
At No. 93 on the Best Places to Live ranking, Memphis has a job market that leaves something to be desired. Its median annual salary is $41,880, a little over $6,000 below the national median, and its 5.2 percent unemployment rate is slightly higher than the national average.
But the cost of living remains proportional to the lower average income, as Memphis residents spend less than 30 percent of the blended annual household income on housing, utilities and property taxes.
Jennie Sampson, Realtor and vice president of Crye-Leike Real Estate Services in Memphis, recommends buying over renting in the Memphis area regardless of whether the market is down or up. She notes the area’s affordability, combined with equity you develop while making mortgage payments, makes homeownership a stronger investment in the long run.
Between 2011 and 2015, Memphis saw a population loss from net migration of 1.53 percent. For a first-time homebuyer looking for more options, a decreasing population can mean the difference between landing your perfect home for a little below asking price versus getting swept up in a bidding war with many eager buyers.
Homes are certainly available, but Sampson notes that the house-hunting process and figuring out what first-time buyers want in a home is relative to what they can afford.
“They can always find a home — sometimes they have to be realistic, and there has to be a few weeks of different houses that they might look at to see this is what the market will afford them,” she says.
Tampa
Zillow’s Most Favorable to First-Time Homebuyers Ranking: 4
U.S. News Best Places to Live 2017 Ranking: 35
First-time homebuyers who like frequent beach days are in luck, as Tampa also makes Zillow’s list for best markets for first-time homebuyers. But like most markets in the U.S. currently, don’t expect buying to be a breeze.
Homebuyers looking for homes on the lower end of the market, below the current median price of $183,200, per Zillow information, may find themselves priced out of the market in Tampa, says Oliver Orlicki, a licensed mortgage originator and team leader for the Orlicki Group at Innovative Mortgage Services Inc., which issues mortgages throughout Florida.
He notes few houses are selling for below asking price in Tampa. But once you lock in your purchase, living in the metro area is easy. “The Tampa Bay area, in terms of affordability overall, … it’s probably one of the best markets I’ve ever been involved with from a lending perspective,” Orlicki says.
Despite seeing strong growth in population over a five-year period — 6.08 percent from 2011-2015 due to net migration — the cost of living in the Tampa metro area remains relatively low, which makes it a solid choice for individuals looking to purchase without exhausting all their savings and income.
San Antonio
Zillow’s Most Favorable to First-Time Homebuyers Ranking: 10
U.S. News Best Places to Live 2017 Ranking: 23
As the highest-ranking Best Places to Live metro area to make Zillow’s top 10 list for first-time homebuyers, San Antonio is experiencing rapid population growth while also enjoying a low cost of living and low unemployment.
As evidenced by the 6.63 percent population growth between 2011 and 2015 due to net migration, San Antonio is attracting many new residents. As the area’s population continues to grow, home values can reasonably be expected to rise, meaning a home purchase now will likely yield a high return when it comes time to sell in the future.
With growth like that, first-time homebuyers should expect some competition for properties on the market. But like Tampa, once you do own a home, you have the upper hand with affordability and a strong likelihood that real estate values will continue to climb.
[See: 10 Terms First-Time Homebuyers Must Know.]
Prepare for Your Purchase
Whether you’re in Indianapolis, Memphis or San Francisco, buying real estate for the first time will likely be intimidating, especially if you don’t seek additional guidance from professionals willing to walk you through the details. For example, Orlicki says he often works with clients who aren’t aware there are mortgage programs allowing them to buy a house with less than 20 percent down.
“When [first-time buyers] have to go out and purchase their single largest asset, they typically are confused, so we try to educate them from the minute they talk to us to the minute they close,” Orlicki says.
The first steps in homebuying deal with all the less glamorous financial factors rarely highlighted on TV shows. Sampson stresses that before you find the house of your dreams you should:
— Get prequalified (or preapproved) for a loan, which will help to set a budget. This includes providing a lender with all details on existing debt and income.
— Provide your real estate agent with a list of desirable features and amenities for the home, including neighborhood, number of bedrooms and bathrooms, and architectural style.
— Discuss with your agent where your budget and wish list may line up and where they diverge.
“That’s part of the education process. They have to see enough [houses], whether it’s online or in person. They have to see this is what kind of bang they can get for their buck,” Sampson says.
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What Best Places to Live Are Ideal for First-Time Homebuyers? originally appeared on usnews.com
