Rising mortgage rates relative to average home prices are prominent factors in the affordability crisis for U.S. homebuyers. Nevertheless, first-time buyers are still showing up strong, accounting for half of all home market purchases in 2023.
Zillow Chief Economist Skyler Olsen joins Market Domination Overtime to talk about the most affordable housing markets for prospective homebuyers, especially young first-time buyers.
“The metric that’s driving this is the percentage of people between the ages of 29 and 43,” Olsen told Yahoo Finance, naming the top 10 metropolitan areas in the U.S. with the most first-time homebuyers. “In other words, there are a lot of millennials out there who are experiencing similar life challenges. These have been a really thriving and popular market during the pandemic.”
For more expert insights and the latest market trends, click here to watch the full episode of Market Domination Overtime.
Editor’s note: This article was written by luke carberry morgan.
video transcript
Josh Lipton: Buying a home is no easy task as prices and mortgage rates soar. But first-time homebuyers accounted for half of all home purchases last year, according to Zillow. To break down the best places for those looking to join the list of first-time homebuyers, we spoke with Zillow Chief Economist Skyler Olsen.
Skylar, nice to meet you. A new report is out. The perfect market for first-time buyers. He has two questions, Skyler. One, how do we define the best here, and two, what is the market for them?
Skylar Olsen: Yes, absolutely. Well, as you said, affordability is a really big challenge. That means three of his four metrics on Zillow’s first-time homebuyer index capture it. The first is the ease of saving for a down payment. So let’s take a look at the actual market price of rent.
Third, sorry, second and third, we don’t have much in stock, so we’re going to capture the affordable prices of the listings that are actually available. And the competitiveness of that inventory is also important. Now, these three indicators highlight that the Midwest is truly king in this sense.
Now consider Indianapolis, St. Louis, and Detroit. But that’s not all. You can move east. And, like Pittsburgh, there’s also the option of “Yes, it’s right here.” Thank you very much. Or Baltimore.
From now on, we want to strike a balance between affordability and livability. The result is some amazing subways on this list. It rose to the top in Austin and San Antonio. And the metric that drives this is the proportion of the population between the ages of 29 and 43.
In other words, there are a lot of Millennials. They are also experiencing the same life challenges. These have been really thriving and popular markets over the course of the pandemic.
Julie Hyman: Well, Skyler, it’s always interesting to see these kinds of lists. However, if you’re buying a home for the first time, you’ll likely be working in a specific location. So, in other words, this simply isn’t the best market to buy a home. You have to work there to move there.
So I’d like to know what the utility is, I mean, it’s great if you already live there. You can pat yourself on the back and start looking for a home. But if not, what do you do with this information?
Skylar Olsen: Well, it’s interesting that you bring this up. So what we’re actually seeing in census data these days is that when prices go up, people move more, or even move farther. Because moving may be necessary to access the lifestyle you envision. In particular, it depends on where you live. That being said, you make a great point that many of us seem to be able to finance our lives through community support. Maybe it’s the upbringing your parents gave you.
And such financial support can be very important. For many people, the need to save for a down payment means they won’t become a buyer until much later. So that’s actually why we included rent affordability in this index. Despite high mortgage interest rates, prices have not fallen, making down payments still difficult.
And to be honest, I think the main reason we publish these types of listings is to sway people’s curiosity about different opportunities across the country and maybe get them to consider different options. . But that may mean that it’s across the metro, smaller locations, or even more remote locations that people typically consider when purchasing power with high mortgage rates.
