Aspiring homeowners are being edged out of the housing market what with climbing home prices, tightening inventory, and homebuyer bidding wars. Some markets, however, remain more accessible to first-time homebuyers than others, according to a LendingTree study.
LendingTree ranked the 100 largest US cities based on factors that made a housing market favorable for first-time buyers: average down-payment amount, the share of buyers using an FHA mortgage, average down-payment percentage, percentage of buyers who have less than prime credit, the share of homes sold that the median income family can afford, and average FHA down payment as a percentage of average down payment for all loans.
LendingTree said it included several down-payment variables in its ranking because the down payment is one of the biggest obstacles to homeownership.
The study revealed that Little Rock, Ark., was the most accessible city for first-time buyers. Although the city did not rank first for any of the six criteria, it got the best aggregate ranking, as it was in the top 20 in all categories. LendingTree said the city’s best attribute is its low average down payment of 12%, or $24,896.
Other top cities include Grand Rapids, Mich., which LendingTree said is the best place to be an FHA borrower, and cities in industrial states such as Youngstown and Dayton, Ohio, and Scranton, Pa., where home prices have not outpaced the growth in the economy.
Denver is the most challenging city for first-time buyers. While the city is not the most challenging city in any single measure, it had weak showings across the board. Denver’s down payments are high at $66,806, and even the FHA down payment is a considerable $22,841.
The 10 most inaccessible cities included the usual suspects like New York City, San Francisco, and Los Angeles, with their high income inequality and home prices above the national average.
"In addition to tight inventory boosting prices in many markets, first-time homebuyers must now contend with rising mortgage interest rates, further reducing their buying power," LendingTree Chief Economist Tendayi Kapfidze said. "As affordability declines, borrowers should consider all the programs available to assist them in becoming homeowners, including FHA
loans. A home can be a valuable asset for Americans, as long as consumers stick to homes well within their budgets."
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