June2016 - Chase[ing] the Dream

TheMReport — News and strategies for the evolving mortgage marketplace.

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TH E M R EP O RT | 9 MDWELL It's no surprise that, according to a recent Zillow report, markets with positive home values, less buyer competition, and mortgage payments that come in lower than rental prices are the most attractive to first-time homebuyers. Sure, these facts may not be groundbreaking in and of itself, but the newly revealed top—and bottom—markets that fit those attributes are. And for first-time buyers, Zillow's list just may be the guidance they need to enter the housing market. "Buying your first home is a big decision that takes a lot of plan- ning," said Zillow Chief Economist Dr. Svenja Gudell. "First-time buyers across the U.S. are up against high prices and low inventory, but [we found] the places where the availability of affordable, entry-level homes, and the presence of cash-buyers are less of an issue." While competition may be healthy for sellers, it can keep inexperienced buyers out of the market. In particular, markets where first-time buyers can find themselves up against all-cash offers are particularly intimidating. "The markets that made Zillow's "best" list are "markets [where buy- ers] won't have to deal with as many bidding wars or run-away prices; [and] they'll be able to find a first home that fits their needs with less stress," Gudell said. BEST MARKETS FOR FIRST-TIME HOMEBUYERS INDIANAPOLIS, INDIANA Indianapolis, Indiana was listed as the best market for new homebuyers with a Zillow Home Value Index of $130,200 and a high available inventory level. Mortgages in the area require only 11 percent of a household's monthly income, compared to 26.1 percent for rent. PITTSBURGH, PENNSYLVANIA Second on the list for first-time homebuyers was Pittsburgh, Pennsylvania. Here borrowers will only have to pay 10.6 percent of their monthly wages on a mortgage payment—versus 24.2 percent on rent—and home values average $126,700. MEMPHIS, TENNESSEE In Memphis, Tennessee, home values are around $112,100, and new market entrants can expect to put 10.9 percent of their monthly income toward a mortgage payment. Not too shabby, considering renters need to allocate nearly triple that, putting 27 percent of their income toward housing. CLEVELAND, OHIO Cleveland, Ohio, a city with high supply of available inventory, has a Zillow Home Value Index of $125,500, and first-time buyers use just 11 percent of their monthly earnings for a mortgage note—big savings compared to the 25.6 percent renters spend. CHICAGO, ILLINOIS With home values sitting near 193,800 and plenty of housing options to choose from, Chicago, Illinois is another market primed for new homeowners. Mortgage payments cost about 14 percent of a buyer's monthly income. Renters in the Windy City? They spend more than 31 percent. Less Competitive Markets Open Doors for First-time Buyers INDIANAPOLIS, INDIANA AUSTIN, TEXAS MEMPHIS, TENNESSEE SAN JOSE, CALIFORNIA WORST MARKETS FOR FIRST-TIME HOMEBUYERS SALT LAKE CITY, UTAH Salt Lake City, Utah was deemed the worst market for first-time homebuyers, thanks to its low available inventory and high monthly mortgage payments. Buyers in the area put 16.2 percent of their monthly income toward housing. Renters pay more—26.4 percent—but the gap isn't nearly as large as in most markets. WASHINGTON, D.C. Coming in at second-worst was Washington, D.C., where average- level housing inventory and a home value index of $364,100 keep first- time homebuyers out of the loop. NEW YORK/NEW JERSEY New York/Northern New Jersey took the third spot on Zillow's list, and with buyers putting more than 25 percent of their income toward monthly mortgage pay- ments, it's no wonder why. The market is also plagued by high amounts of cash offers, and an average amount of inventory. AUSTIN, TEXAS The fourth-worst market for homeowners was Austin, Texas. Not surprisingly, the city's low inventory and $247,000 home value keeps many of the city's younger population from buy- ing in. Though buyers do put nearly 17 percent of their monthly income toward a mortgage, there is one silver lining: renting re- quires a whopping 30.7 percent. SAN JOSE, CALIFORNIA Finally, coming in at number five was San Jose, California, where home values clocked in at a jaw- dropping $956,500. San Jose was the only market on the list where mortgage prices outpaced rentals. According to Zillow, buy- ers need to spend 42.6 percent of their income on a mortgage payment; renting requires a little less, at 41.2 percent. Source: Zillow "Indianapolis and Pittsburgh Named Best Markets for First-Time Home Buyers"

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