2017’s Best & Worst Places for First-Time Home Buyers

3:03 AM

Posted by: Richie Bernardo

Buying a home for the first time is an exciting and important milestone for many Americans. As such, first-time home buyers must carefully consider a number of factors — what they want and need relative to what they can afford, for instance — before diving to the deep end of real estate.

Often, potential buyers begin searching for their dream homes and drafting their wish lists without a realistic idea of market prices, interest rates or even their eligibility to obtain a mortgage.

To simplify the process, WalletHub’s analysts compared 300 cities of varying sizes across 23 key indicators of market attractiveness, affordability and quality of life. Our data set ranges from cost of living to real-estate taxes to property-crime rate. Read on for our findings, valuable insight from a panel of experts and a full description of our methodology.

  1. Main Findings
  2. Rankings by City Size
  3. Ask the Experts
  4. Methodology

Main Findings

Embed on your website<iframe src="//d2e70e9yced57e.cloudfront.net/wallethub/embed/5564/geochart-homebuyer.html" width="556" height="347" frameBorder="0" scrolling="no"></iframe> <div style="width:556px;font-size:12px;color:#888;">Source: <a href="http://ift.tt/2twZFYs;  

Rankings by City Size

Rank (1= Best)

Large Cities (Score)

Rank (1= Best)

Midsize Cities (Score)

Rank (1= Best)

Small Cities (Score)
1 Raleigh, NC (64.192) 1 McKinney, TX (68.318) 1 Frisco, TX (68.197)
2 Lexington, KY (63.993) 2 Cary, NC (67.982) 2 Allen, TX (68.148)
3 Colorado Springs, CO (63.536) 3 Lincoln, NE (66.605) 3 Norman, OK (67.638)
4 Tampa, FL (63.236) 4 Boise, ID (66.264) 4 Richardson, TX (66.32)
5 Fort Worth, TX (63.147) 5 Gilbert, AZ (65.369) 5 Thornton, CO (66.036)
6 Omaha, NE (62.933) 6 Grand Rapids, MI (65.174) 6 Murfreesboro, TN (65.972)
7 El Paso, TX (62.773) 7 Overland Park, KS (64.804) 7 Denton, TX (65.831)
8 Nashville, TN (62.302) 8 Fort Wayne, IN (64.562) 8 Greeley, CO (65.632)
9 Oklahoma City, OK (61.984) 9 Peoria, AZ (64.468) 9 Charleston, SC (65.328)
10 Denver, CO (61.655) 10 Grand Prairie, TX (64.376) 10 Arvada, CO (64.632)
11 Louisville, KY (61.547) 11 Chandler, AZ (64.243) 11 Carrollton, TX (64.586)
12 Pittsburgh, PA (61.304) 12 Fort Collins, CO (63.963) 12 Spokane Valley, WA (64.009)
13 Minneapolis, MN (60.694) 13 Plano, TX (63.358) 13 Cedar Rapids, IA (63.777)
14 Atlanta, GA (60.635) 14 Henderson, NV (63.188) 14 Green Bay, WI (63.357)
15 Charlotte, NC (60.401) 15 Madison, WI (62.767) 15 Centennial, CO (62.768)
16 Aurora, CO (60.225) 16 Salt Lake City, UT (61.872) 16 Surprise, AZ (62.718)
17 Mesa, AZ (60.078) 17 Garland, TX (61.785) 17 Roanoke, VA (62.318)
18 Columbus, OH (60.033) 18 Amarillo, TX (61.533) 18 Davenport, IA (62.273)
19 Austin, TX (59.504) 19 Richmond, VA (61.406) 19 Yakima, WA (62.037)
20 Phoenix, AZ (59.061) 20 Scottsdale, AZ (61.342) 20 Westminster, CO (61.78)
21 Arlington, TX (59.024) 21 Orlando, FL (60.606) 21 Broken Arrow, OK (61.711)
22 Las Vegas, NV (58.632) 22 Durham, NC (60.59) 22 Kenosha, WI (61.591)
23 Jacksonville, FL (58.111) 23 Port St. Lucie, FL (60.503) 23 Livonia, MI (61.112)
24 Tulsa, OK (58.069) 24 Augusta, GA (60.361) 24 Roseville, CA (61.084)
25 Virginia Beach, VA (58.045) 25 St. Paul, MN (60.19) T-25 Pueblo, CO (61.044)
26 Dallas, TX (57.58) 26 St. Petersburg, FL (60.188) T-25 Sterling Heights, MI (61.044)
27 San Antonio, TX (56.591) 27 Huntsville, AL (59.772) 27 Joliet, IL (60.976)
28 Tucson, AZ (56.431) 28 Columbus, GA (59.685) 28 Longmont, CO (60.777)
29 Sacramento, CA (55.901) 29 Chesapeake, VA (59.579) 29 Roswell, GA (60.7)
30 Bakersfield, CA (55.708) 30 Cape Coral, FL (59.537) 30 Hampton, VA (60.602)
31 Kansas City, MO (55.683) 31 Glendale, AZ (59.317) 31 Wilmington, NC (60.575)
32 Milwaukee, WI (54.948) 32 Tempe, AZ (59.202) 32 Boca Raton, FL (60.495)
33 Corpus Christi, TX (54.584) 33 Winston-Salem, NC (59.194) 33 Mesquite, TX (60.237)
34 Philadelphia, PA (54.348) 34 Des Moines, IA (59.101) 34 Peoria, IL (60.096)
35 St. Louis, MO (54.319) 35 Laredo, TX (59.074) 35 Warren, MI (60.064)
36 Indianapolis, IN (54.247) 36 Irving, TX (58.934) 36 Manchester, NH (59.818)
37 Seattle, WA (53.905) 37 Newport News, VA (58.547) 37 Naperville, IL (59.769)
38 Cleveland, OH (53.625) 38 Vancouver, WA (58.42) 38 Dearborn, MI (59.474)
39 Memphis, TN (53.517) 39 Knoxville, TN (58.275) 39 Palm Bay, FL (59.451)
40 Houston, TX (53.358) 40 Spokane, WA (58.173) 40 Fort Smith, AR (59.211)
41 Wichita, KS (53.03) 41 Akron, OH (58.08) 41 Springfield, IL (58.955)
42 Riverside, CA (52.503) 42 Cincinnati, OH (57.909) 42 Erie, PA (58.951)
43 Portland, OR (52.354) 43 Norfolk, VA (57.731) 43 Portsmouth, VA (58.843)
44 Fresno, CA (52.22) 44 Elk Grove, CA (57.32) 44 Bellevue, WA (58.815)
45 Chicago, IL (51.935) 45 Pembroke Pines, FL (57.267) 45 Lakewood, CO (58.663)
46 San Diego, CA (51.142) 46 North Las Vegas, NV (57.083) 46 Clearwater, FL (58.645)
47 Detroit, MI (50.514) 47 Greensboro, NC (56.435) 47 North Charleston, SC (58.644)
48 Albuquerque, NM (50.416) 48 Reno, NV (56.315) 48 Savannah, GA (58.256)
49 Baltimore, MD (49.982) 49 Buffalo, NY (56.313) 49 Clovis, CA (57.997)
50 New Orleans, LA (47.708) 50 Aurora, IL (56.122) 50 Vacaville, CA (57.928)
51 Anaheim, CA (47.159) 51 Little Rock, AR (55.093) 51 Renton, WA (57.764)
52 San Jose, CA (46.866) 52 Springfield, MA (54.948) 52 Elgin, IL (57.528)
53 Honolulu, HI (46.341) 53 Tacoma, WA (54.895) 53 Sunrise, FL (57.475)
54 Santa Ana, CA (45.566) 54 Rancho Cucamonga, CA (54.514) 54 Visalia, CA (57.35)
55 Boston, MA (44.805) 55 Toledo, OH (54.377) 55 Tuscaloosa, AL (57.289)
56 Washington, DC (43.549) 56 Montgomery, AL (54.1) 56 High Point, NC (57.245)
57 Long Beach, CA (43.053) 57 Lancaster, CA (53.97) 57 Yuma, AZ (57.034)
58 Miami, FL (42.473) 58 Salem, OR (53.774) 58 Alexandria, VA (56.996)
59 Los Angeles, CA (42.152) 59 Mobile, AL (53.605) 59 Hillsboro, OR (56.774)
60 New York, NY (40.27) 60 Moreno Valley, CA (53.372) 60 Victorville, CA (56.734)
61 San Francisco, CA (39.011) 61 Fayetteville, NC (53.37) 61 Sandy Springs, GA (56.719)
62 Oakland, CA (37.476) 62 Fontana, CA (53.047) 62 Lakeland, FL (56.696)
() 63 Jersey City, NJ (52.967) 63 Athens-Clarke, GA (56.618)
() 64 Irvine, CA (52.893) 64 Murrieta, CA (56.522)
65 Worcester, MA (52.341) 65 Dayton, OH (56.418)
66 Ontario, CA (52.224) 66 Allentown, PA (56.219)
67 Jackson, MS (52.149) 67 Davie, FL (55.791)
68 Eugene, OR (52) 68 Waukegan, IL (55.61)
69 Rockford, IL (51.799) 69 Fairfield, CA (55.467)
70 Springfield, MO (51.778) 70 Temecula, CA (55.437)
71 Birmingham, AL (51.476) 71 Plantation, FL (55.305)
72 Palmdale, CA (51.461) 72 Kent, WA (55.284)
73 Stockton, CA (51.431) 73 Everett, WA (54.89)
74 Modesto, CA (51.25) 74 Miramar, FL (54.609)
75 Providence, RI (50.936) 75 Ann Arbor, MI (54.604)
76 Corona, CA (50.916) 76 Chico, CA (54.407)
77 Rochester, NY (50.324) 77 Gainesville, FL (54.32)
78 Santa Rosa, CA (49.486) 78 Rialto, CA (54.049)
79 Baton Rouge, LA (49.435) 79 Lowell, MA (53.906)
80 Tallahassee, FL (49.432) 80 Waterbury, CT (53.843)
81 Fort Lauderdale, FL (49.241) 81 Stamford, CT (53.686)
82 Santa Clarita, CA (49.036) 82 Lansing, MI (53.648)
83 Shreveport, LA (48.97) 83 West Palm Beach, FL (53.569)
84 San Bernardino, CA (48.913) 84 New Haven, CT (53.551)
85 Hayward, CA (48.823) 85 Hollywood, FL (53.47)
86 Hialeah, FL (48.753) 86 Federal Way, WA (53.101)
87 Oxnard, CA (48.56) 87 Coral Springs, FL (53.095)
88 Chula Vista, CA (48.533) 88 New Bedford, MA (52.867)
89 Oceanside, CA (47.447) 89 Pompano Beach, FL (52.65)
90 Pomona, CA (46.921) 90 Hartford, CT (52.417)
91 Garden Grove, CA (46.591) 91 Santa Maria, CA (51.951)
92 Salinas, CA (46.463) 92 Albany, NY (51.493)
93 Huntington Beach, CA (46.325) 93 Flint, MI (51.431)
94 Fremont, CA (46.129) 94 Bridgeport, CT (51.288)
95 Yonkers, NY (45.432) 95 Miami Gardens, FL (51.176)
96 Anchorage, AK (45.111) 96 Beaverton, OR (51.139)
97 Glendale, CA (41.207) 97 Antioch, CA (50.953)
98 Newark, NJ (39.299) 98 Vallejo, CA (50.933)
() 99 Fall River, MA (50.661)
() 100 Thousand Oaks, CA (50.636)
() 101 Mission Viejo, CA (50.557)
() 102 Simi Valley, CA (50.534)
() 103 Quincy, MA (50.371)
() 104 Gresham, OR (49.57)
() 105 Boulder, CO (49.448)
() 106 Carlsbad, CA (49.385)
() 107 Escondido, CA (48.875)
() 108 Concord, CA (48.604)
() 109 Lynn, MA (48.383)
() 110 Richmond, CA (47.962)
() 111 Orange, CA (47.949)
() 112 Norwalk, CA (47.707)
() 113 Ventura, CA (47.561)
() 114 Vista, CA (47.392)
() 115 Carson, CA (47.087)
() 116 West Covina, CA (47.011)
() Fullerton, CA
() Cambridge, MA
() El Cajon, CA
() Elizabeth, NJ
() Compton, CA
() Burbank, CA
() Santa Clara, CA
() Downey, CA
() Brockton, MA
() Pasadena, CA
() Paterson, NJ
() Costa Mesa, CA
() South Gate, CA
() Sunnyvale, CA
() Torrance, CA
() Inglewood, CA
() Westminster, CA
() Daly City, CA
() El Monte, CA
() San Mateo, CA
() Miami Beach, FL
() Santa Monica, CA
() Berkeley, CA
() Santa Barbara, CA

 

Ask the Experts

Purchasing real estate for the first time can be a daunting experience for many consumers. But it doesn’t have to be. For advice and insight, we asked a panel of experts to share their thoughts on the following key questions:

  1. What should first-time home buyers consider when choosing a neighborhood
  2. How do you know that you are financially ready to buy your first home?
  3. What do you recommend as the minimum down payment for a first-time home buyer?
  4. What effect did Trump’s Executive Order increasing the cost of FHA-backed loans have on first-time home buyers?
  5. How can federal, state and local policymakers responsibly and effectively increase home affordability, particularly for first-time home buyers?
< > Lou Tisler Director of the Housing Counseling Network at The National Community Reinvestment Coalition Lou Tisler What should first-time home buyers consider when choosing a neighborhood? Transportation costs -- many first-time homebuyers are looking at utility costs, taxes, insurance, but few take into account transportation costs, either to and from work, or within the neighborhood. Though gas prices are low, these still add up on a weekly, monthly, yearly basis. How do you know that you are financially ready to buy your first home? The best way to avoid the pitfalls of homeownership is to be an educated buyer. Free or low costs, home buyer education is available throughout the United States. Reading a website is a good start, but fully immersing yourself in what it means to be a homeowner, what is negotiable on the mortgage statement, what will break down first and how much will it cost, what to do if you fall behind, all these are answered through housing counseling. You can find an agency near you here. What do you recommend as the minimum down payment for a first-time home buyer? 3.5% down when closing the loan; 3.5% in the bank for emergency purposes. What effect did Trump’s Executive Order increasing the cost of FHA-backed loans have on first-time homebuyers? Since more low to moderate income homeowners are purchasing using FHA, an increase of $250 per $100,000 home purchased is passed onto low to moderate income homebuyers. How can federal, state and local policymakers responsibly and effectively increase home affordability, particularly for first time homebuyers? Many local governments and schools are funded on property taxes; if the federal and state governments continue to trim their budgets on the backs of local municipalities’ budgets, property taxes will continue to be on the ballot, and will continue to increase. The most cost-effective way to make homeownership affordable is to make property taxes affordable; whether for a first-time home buying millennial or a soon to be, fixed income retiree. Katrin B. Anacker Associate Professor in the Schar School of Policy and Government at George Mason University Katrin B. Anacker What should first-time home buyers consider when choosing a neighborhood? There are differences among first-time home buyers. A household with two earners and at least one school-aged child will have different preferences, compared to a household with one earner, without any children. How do you know that you are financially ready to buy your first home? A potential borrower may want to consult a HUD-approved housing counselor or a lender, to discuss whether he/she is financially read to buy his/her first home. What do you recommend as the minimum down payment for a first-time home buyer? The threshold for a conventional mortgage is 20 percent, and for a mortgage insured by the FHA is 3.5 percent. Michelle M. Thompson Associate Professor in the Department of Planning & Urban Studies, Louisiana Manufactured Housing Association Professor in CUPA, and Faculty Advisor for Bachelor of Science in Urban Studies and Planning Internships & Honors Program at the University of New Orleans Michelle M. Thompson What should first-time home buyers consider when choosing a neighborhood? First-time homebuyers face many challenges when selecting a home which may, or may not be, in their neighborhood of choice. For example, if a first-time homebuyer wants to have a neighborhood that is "family friendly" (with parks, shopping and schools within a reasonable distance), there may be a higher "cost-for-convenience" reflected in the housing prices. For first-time homebuyers seeking affordable housing, or with limited funds for down-payment in a higher end market, housing choices may be limited, thus indirectly pre-selecting neighborhoods to consider. In any scenario, first-time homebuyers should use all publicly-available information to establish a neighborhood profile, and not just rely on secondary listing or promotional advertisements. It is imperative that the first-time homebuyers gather information beyond the immediate block, including information on the sales prices of similar houses, demographics, community assets (e.g., shopping, health centers, parks/playgrounds), crime, public safety response times and flood zone (which affects the cost of flood insurance). This data can be obtained through municipal websites or they could request this "free" information from the appropriate government office in person, via phone or email. Beyond statistics, visiting the community at different times of the day will give a more well-rounded perspective along with the neighborhood profile. Overall, going with your “gut” may not be the best way to select a house or neighborhood, when making one of the most important and expensive investment decisions the first time around. How do you know that you are financially ready to buy your first home? In most cases the level of “financial fitness” of a first-time homebuyer is pre-determined by the lender. There are a number of factors that affect the ability to obtain a first mortgage, such as minimum down payment, tri-merge credit score, work history, salary and debt service. There are many free, low-cost in-person or online courses that anyone can participate in, to learn more about the home-buying process and related financial education. Through these courses a first-time homebuyer will have a better idea of what may need to be improved to become mortgage eligible. Since the criteria for “readiness” varies, a first-time homebuyer may want to interview a number of mortgage lenders and have their financial profile reviewed. Information on what might be considered “an issue” during the lending review process could be raised during these conversations. Alternatively, a lender pre-qualification letter may evaluate readiness by conducting a pre-mortgage screening. Most of these evaluations will require an application fee and may only be viable for a limited period of time. Even if the outcome of the financial evaluation in a fitness class or pre-qualification isn't positive, you now have the information needed to improve your ability to buy a house at a later time. What do you recommend as the minimum down payment for a first-time home buyer? There is an industry standard of providing at least 20% as a down payment for a mortgage. However, the down payment amount, rate of interest and mortgage terms vary by institution. The first-time homebuyer may want to evaluate the impact that a lower (5-10%) up-front investment may have on the interest rate, the closing costs and debt service over time. In order to have flexibility in choosing, more favorable lending terms may improve with the minimum "standard" down payment. Beyond the down payment, first-time homebuyers may want to save at least 3 months of the mortgage, closing costs plus the first year of taxes. It is imperative for first-time homebuyers to not expend all available funds at the start of a home purchase, in case there are interruptions (job change, tax increase, home repairs) that were not anticipated at the time of purchase. What effect did Trump’s Executive Order increasing the cost of FHA-backed loans have on first-time homebuyers? Aaron Crowe from Mortgageloan.com stated that the "Obama administration announced on Jan. 9 a reduction in annual premiums for mortgage insurance for FHA loans from 0.85 percent to 0.60 percent of the loan balance, effective Jan. 27." Essentially, this change would have decreased the monthly debt service for each mortgage loan. For example, industry experts have suggested savings of up to $500 a year on a $200,000 mortgage. However, "less than an hour after being sworn in as president, Donald Trump signed his first executive order, eliminating a drop in FHA mortgage insurance premiums that was to take effect a week later." First-time homebuyers would be most affected due to the debt service ceiling requirements. This change has a potentially adverse impact on lower-income borrowers who want to obtain a higher priced home using FDIC-backed mortgages. For first-time homebuyers ready to purchase a home, Trump's Executive Order may limit options to find lower priced homes to meet desired affordability. How can federal, state and local policymakers responsibly and effectively increase home affordability, particularly for first time homebuyers? No matter what level of government, policymakers should take less time “studying” a known problem -- housing affordability --, and turn this need into a national housing action plan. If the first executive order from the current administration is any indication of the direction the U.S. Housing & Urban Development Department may be heading in, then issues of “responsible,” “fair” and “effective” housing policy may be difficult to implement at the state and local levels. Similar to the Affordable Care Act ("Obama-care"), one size does not fit all, since the housing styles, sizes, construction type, access and distance to community resources vary significantly. In a utopian world, homelessness would not be a problem if vacant, abandoned, yet functional buildings were turned into affordable housing. The city of New Orleans, Louisiana administration (NOLA), post Hurricane Katrina, has moved from recovery to renewal by developing and implementing place-based community plans to expand housing options. Mayor Landrieu's Office of Performance and Accountability’s “BlightSTAT" open government forum monitors an integrated project that turned approximately 70 formerly historic houses, from the Veteran's Affairs/Louisiana State University (VA/LSU) hospital campus, to affordable housing. The adaptive reuse of the historic houses on formerly vacant, blighted or abandoned lots is not a new idea. However, NOLA was able to combine U.S. Housing & Urban Development soft-second mortgages, Louisiana Land Trust option 2/3 vacant lots, eminent domain to claim/move/rehab historic houses that will have a significant financial impact beyond the price of a first-time homebuyer loan. For federal, state and local policies &funded plans to be successful, there must be an honest effort to improve citizen participation. The VA/LSU Historic Affordable Housing project is still in process, but it will soon prove to be not only responsible and effective, but also affordable. W. Dennis Keating Professor Emeritus of Urban Studies and Law at Cleveland State University W. Dennis Keating What should first-time home buyers consider when choosing a neighborhood? When choosing a neighborhood, key factors are:
  • Location related to work, transportation, shopping, amenities (e.g., parks);
  • Housing values and conditions (including possible data through sources like Trulia and Zillow);
  • Nearby schools (if children and future children are a relevant consideration);
  • Reputation of the neighborhood (if known, including through a neighborhood-based organization, homeowners association, social network);
  • Safety (if crime data is available);
  • Property taxes and any other state, regional and local fees affecting homeowners in the jurisdiction.
How do you know that you are financially ready to buy your first home? You are financially ready when you have enough of your own savings for the mortgage down payment, and you have enough regular income for projected monthly housing expenses (mortgage, utilities, and maintenance/repairs), within 30-40% of your net income. What do you recommend as the minimum down payment for a first-time home buyer? The minimum down payment I would recommend is 10-15%. What effect did Trump’s Executive Order increasing the cost of FHA-backed loans have on first-time homebuyers? The Trump FHA Order made affordability more difficult for some users of the FHA program. How can federal, state and local policymakers responsibly and effectively increase home affordability, particularly for first time homebuyers? Some of the policies that state and local governments can implement to increase affordability include:
  • Housing trust funds (that subsidize low- and moderate-income housing);
  • Inclusionary housing/zoning (to increase the supply of affordable units);
  • Property tax abatements: subsidized loans (e.g., the first time low-and moderate-income homebuyer program of the Ohio Housing Finance Agency);
  • Self-help: support of low-income programs, like that of Habitat for Humanity;
  • Lease/purchase (e.g., the program of the Cleveland Housing Network for low-income tenants);
  • Housing savings accounts: promoting these with lenders;
  • Housing counseling: support for agencies that offer homebuyer educational courses (working with lenders);
  • Support for co-housing programs;
  • Support for community land trusts.
Deden Rukmana Associate Professor and Coordinator of the Urban Studies and Planning Program & Co-Chair of the Global Planning Educators Interest Group at Savannah State University Deden Rukmana What should first-time homebuyers consider when choosing a neighborhood? From a perspective of an urban planner, first-time homebuyers should choose a neighborhood with good access to public transportation, amenities and facilities for family members, particularly young children. Neighborhoods in suburban areas are now less attractive due to the increasing commute time. The 2010 Census Data indicate that more people moved to the inner city from the suburban areas, particularly young couples. Such a trend will continue in the next few decades. How do you know that you are financially ready to buy your first home? You are ready to buy your first home when you're secured with your employment for the next five years, and spend less than 40% of your income to housing expenses. What do you recommend as the minimum down payment for a first-time home buyer? I would recommend 5-8% of the price of the house as the down payment. How can federal, state and local policymakers responsibly and effectively increase home affordability, particularly for first time homebuyers? The government needs to expand the Low-Income Housing Tax Credit (LIHTC) program. The supply of affordable housing needs to be expanded in all parts of the urban areas. The government should discourage the phenomenon of NIMBY (Not In My Backyard) when it comes to the development of affordable housing. Christopher B. Leinberger Charles Bendit Distinguished Scholar and Research Professor & Chair of the Center for Real Estate and Urban Analysis at the George Washington University School of Business Christopher B. Leinberger What should first-time home buyers consider when choosing a neighborhood? The most important thing is whether the neighborhood is “walkable urban” or “drivable sub-urban.” A walkable urban place means there are many transportation options (bus, rail, biking, auto, etc.), but most everyday things are accessible by walking (about 1500 to 3000 feet is considered walking distance). Drivable sub-urban locations mean you have to drive for almost everything outside the home. The best way to determine if the house is walkable urban is Walk Score, which has a 0-100 ranking system of all houses and most communities in the country. A Walk Score above 60 is considered walkable urban. Walkable urban neighborhoods are generally the most expensive on a price per square foot basis, sometimes two-times, and even three-times more expensive than drivable sub-urban, and will probably see the most price appreciation over the next decade or more. Drivable sub-urban houses tend to be over-built, resulting in lower prices per square foot than walkable urban houses due to excess supply, though that means you can get substantial bargains. You will have to factor in owning more cars into your household budget though, and the increased driving for commutes and other household errands. How do you know that you are financially ready to buy your first home? The obvious financial considerations are having the required down payment and the monthly all-in mortgage and insurance costs. One consideration few households make is the cost of transportation, the second household budget category, which is a direct result of where the house is located. Generally speaking, a walkable urban home will require fewer cars in the household. In general, drivable sub-urban households spend 25% of the income on transportation, almost all of that amount for car loan repayment, insurance, gas, maintenance and parking. By dropping one car out of the typical household saves, according to the AAA, $9,400 per year. This translates into increased mortgage capacity of $150,000. Cars always depreciate, while houses tend to appreciate. Having more, and generally cheaper transportation options (walking just involves a good pair of shoes), walkable urban households on average spend 9% of their household budget on transportation, a substantial savings that could be applied to the increased housing costs for walkable urban communities. What do you recommend as the minimum down payment for a first-time home buyer? The lowest possible, but if you have more, invest whatever you can, without draining your “rainy day” fund. The lowest you need to get into the house, since getting on the ownership ladder is the first step in building household net worth and having the security and pleasure of homeownership. The maximum you can will get you on the way to paying off your mortgage someday. This is counter to conventional wisdom, and exceedingly old-fashioned. However, my household investment strategy is to get out of all personal debt (student, mortgage, car, credit card -- which is the stupidest debt, etc.) as soon as possible. This will give you the most valuable asset -- peace of mind. Plus, it means you only have to earn enough for variable cost household items (food, insurance, transportation, vacation, savings, etc.). Not having any debt means you can say “no” to being a wage slave at some point, allowing you to only take employment you want to take. How can federal, state and local policymakers responsibly and effectively increase home affordability, particularly for first time homebuyers?
  • Adjust the mortgage tax deduction (MTD) to only under $500,000 mortgages (may be higher for higher cost metro areas), aiming at supporting the first time mortgage market, rather than well-to-do households who get the vast majority of the mortgage tax deduction. The MTD costs the federal government $100 billion per year in lost taxes, mainly to subsidize the upper-middle and upper income households, who do not need it.
  • Invest more infrastructure dollars in existing and new transit, biking and walking infrastructure, which will allow for more walkable urban housing to be built. Currently, only 20% of federal infrastructure goes to walkable urban infrastructure, 80% for highways. There have been hundreds of local bond measures for transit over the past decade, and over 70% have passed raising local taxes, primarily sales taxes, to build more transit. In 2016, over $200 billion of new taxes were raised locally for transit in just that year; in comparison, the federal government spends $60 billion on all transportation per year. So the encouragement of more local spending on transit, biking and walking infrastructure will help make more walkable urban housing happen, and lower household transportation costs.
  • Fight NIMBY (Not In My Back Yard) opposition to higher density housing, particularly in walkable urban places. NIMBYs cause housing prices to spike unnecessarily by putting supply constraints on the market. Plus, it is estimated that 1-2% of additional annual GDP growth would occur if NIMBYs would be overridden and the market can give us what we want. Also, walkable urban housing is by far the most environmentally sustainable; moving a household from a drivable sub-urban location to a walkable urban place drops green house gas emissions by 50-80%, the number one way we can address climate change.
Alessandro Rebucci Assistant Professor of Economics, Finance and Real Estate at Johns Hopkins Carey Business School Alessandro Rebucci What should first-time home buyers consider when choosing a neighborhood? The old adage says “location,” “location,” “location.” What that means nowadays is proximity to urban areas where health, education, and other services are easily accessible, with short commutes, and plenty of labor demand. Properties (and especially apartments) with these characteristics are likely to be more liquid investments (easily resalable), and appreciate or preserve more values over the next several years. The millions of millennials who are shaping the market have developed a taste for these types of housing solutions, and will provide strong support to these markets for years to come. How do you know that you are financially ready to buy your first home? Job security is important to be able to service a mortgage smoothly. That means the confidence that rain or shine, a well-paid job can be easily found. If you are struggling to find employment, homeownership is not yet for you, and might be the rope around your neck if somehow acquired through lax underwriting or easy loans at the top of the credit cycle. In general, comparing cost of renting with cost of owning is a good disciplining exercise. If owning is cheaper than renting and the differential can be locked in for a few years, don’t miss out on the opportunity to start building some equity and wealth. What do you recommend as the minimum down payment for a first-time home buyer? It depends. I bought my first apartment in D.C. 20 years ago, with $7,000. It was an FHA-approved property and I was supposed to put 5% percent down, but they made a mistake and I ended up putting only 3% down, and got some cash back at closing. I used the capital gain from that first apartment to buy a small house when my children were born. Were it not for the FHA loan with 5% down, I would not have become a homeowner until much later. But I entered the market at the very bottom of the cycle and I knew it. To be safe, 20% is a good margin. We are not going to see prices dropping by more than that in a few years, like during the last crisis, anytime soon again. What effect did Trump’s Executive Order increasing the cost of FHA-backed loans have on first-time homebuyers? As my story above illustrates, it did not help. The GSEs face a number of problems, and the U.S. system of housing finance is in need of reform, including cutting back on a number of generous subsidies. But I am not sure that can be achieved or even started with a piecemeal approach, targeting this or that specific spot in the system. How can federal, state and local policymakers responsibly and effectively increase home affordability, particularly for first time homebuyers? If you are in the formal job market, homeownership is accessible and affordable in the U.S. What in my opinion was lost over the past couple of decades is equal opportunity of employability across segment of the income, and wealth distribution. Or, to put it differently, we have an issue of access to education, not access to the housing market. Good education leads to good access to the labor market, and that brings with it access to the housing and health insurance market. It is education, from child care to higher education, where the U.S. is in need of a serious rethinking of its public policies.

Methodology

To determine the most favorable housing markets for first-time home buyers, WalletHub’s analysts compared a sample of 300 U.S. cities (varying in size) across three key dimensions: 1) Affordability, 2) Real-Estate Market and 3) Quality of Life.

We evaluated those dimensions using 23 relevant metrics, which are listed below with their corresponding weights. Each metric was graded on a 100-point scale, with a score of 100 representing the most favorable conditions for first-time home buyers. Data for metrics marked with an asterisk (*) were available at the state level only.

Finally, we determined each city’s weighted average across all metrics to calculate its total score then used the resulting scores to rank-order our sample. Our sample considers only the city proper in each case and excludes cities in the surrounding metro area. Each city was categorized according to the following population-size guidelines:

  • Large cities: More than 300,000 people
  • Midsize cities: 150,000 to 300,000 people
  • Small cities: Fewer than 150,000 people
Affordability – Total Points: 33.33
  • Housing Affordability: Triple Weight (~14.29 Points)Note: This metric was calculated as follows: Median House Price / Median Annual Household Income.
  • Average Cost of Homeowner’s Insurance: Full* Weight (~4.76 Points)
  • Cost of Living: Full Weight (~4.76 Points)
  • Cost per Square Foot: Full Weight (~4.76 Points)Note: This metric measures specifically the median list price per average home square footage.
  • Real-Estate Tax Rate: Full Weight (~4.76 Points)
Real-Estate Market – Total Points: 33.33
  • Rent-to-Price-Ratio: Double Weight (~6.06 Points)
  • Housing-Market Health Index: Full Weight (~3.03 Points)
  • Share of Homes Sold in One Year: Full Weight (~3.03 Points)
  • Median Home-Price Appreciation: Double Weight (~6.06 Points)
  • Foreclosure Rate: Full Weight (~3.03 Points)
  • Buy vs. Rent Breakeven Horizon: Full Weight (~3.03 Points)Note: The “breakeven horizon” is defined by Zillow as the point, in years, at which buying a home becomes less expensive than renting the same home.
  • Share of Listings with Price Cuts: Full Weight (~3.03 Points)
  • Share of Housing Units Built between 2010 and 2015: Full Weight (~3.03 Points)
  • Building-Permit Activity: Full Weight (~3.03 Points)Note: This metric measures the number of unit permits pulled per 1,000 residents.
Quality of Life – Total Points: 33.33

 Sources: Data used to create this ranking were collected from the U.S. Census Bureau, Council for Community and Economic Research, Zillow, Federal Bureau of Investigation, Insurance Information Institute, AreaVibes, Renwood RealtyTrac and WalletHub research.



from Wallet HubWallet Hub


via Finance Xpress

Share This Story

Tags: ,

Lorem ipsum dolor sit amet, consectetuer adipiscing elit. Aenean commodo ligula eget dolor Aenean massa.

You Might Also Like

1 comments

  1. UnknownDecember 4, 2018 at 3:30 AM

    Thank you for sharing this information. It has helped me to know more about
    home loan process

    ReplyDelete

Popular Posts

Like us on Facebook

Flickr Images