Although a smaller inventory, increasing prices and tight lending standards are making it hard for millennials to become homeowners, a new report shows that some housing markets are primed for first-time buyers this fall.
The National Association of Realtors on Monday released its top 10 markets for millennials to buy a home in the coming months.
Realtor.com regularly tracks real estate data and develops monthly reports featuring the number of listings, median age of inventory and median list price across the U.S. and in specific markets, along with year-over-year and month-over-month changes.
“Millennials are a critical component of the first-time homebuyer market segment, and getting this segment functioning again is an absolute necessity for bringing the housing ecosystem back to full health,” Realtor.com’s chief economist, Jonathan Smoke, said in a statement.
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“Decreased first-time homebuyer sales have lessened the demand for new construction and limited housing’s contribution to overall economic growth — perpetuating a cycle of limited job and income growth.”
The association’s August National Housing Trend Report showed homes were listed at prices 7.5% higher than last year, but remained consistent month-over-month.
As well, the total number of homes on the market in August decreased slightly compared with last year and the previous month. Properties spent 86 days on the market in August — six days less than last year, but four days longer than July.
Millennials continue to face the financial aftermath of the recession, including reduced wages and depleted savings, Smoke said. This makes monthly mortgage affordability and 20% down payments especially difficult as home prices increase.
“The neighborhoods on our list offer plenty of opportunity for millennials looking to get into the market in the next few months,” he said. “Not only are first-timers more likely to be able to afford homes in these areas, less competition in these markets means they are more likely to have their offers accepted.”
Lawrence Yun, chief economist and senior vice president of research for the National Association of Realtors, pointed out another advantage for first-time home buyers.
Investors are becoming less of a presence in the current housing market, Yun said in the statement. “In August, sales to investors fell to 12%, which is the lowest we’ve seen in nearly five years.
“For first-time home buyers this means reduced competition and less all-cash offers in the marketplace.”
All the markets on the realtor.com top 10 list have demonstrated strength in housing affordability and increases in inventory. To be included on the list, local areas had to report a Housing Affordability Index around 240.
The index measures the ability of a family earning the median income to purchase a median-priced home. In an area with an index number of 240, families making the median household income could afford to buy a home 2.4 times the price of the median home in the area.
Also necessary to be included on the top 10 list, a market had to demonstrate either a month-over-month or a year-over-year increase in inventory.
Following are the realtor.com top 10 best markets for millennial homebuyers, ranked by their housing affordability index.
10. Memphis, Tennessee-Arkansas-Mississippi
NAR Affordability Index: 236.93
Median listing price: $154,900
Total listings: 6,129
% change (yy or mm): 17.8% yy
9. Grand Rapids-Muskegon-Holland, Mich.
NAR Affordability Index: 240.48
Median listing price: $159,900
Total listings: 5,679
% change (yy or mm): 3.2% mm
8. Charleston, West Virginia
NAR Affordability Index: 240.79
Median listing price: $146,450
Total listings: 1,358
% change (yy or mm): 7.2% yy
7. Melbourne-Titusville-Palm Bay, Florida
NAR Affordability Index: 259.32
Median listing price: $165,000
Total listings: 5,389
% change (yy or mm): 39.8% yy