Buying a home has now become increasingly more difficult, especially with soaring mortgage rates pricing out first-time homebuyers.
As of February, first-time buyers would need to earn at least $113,520 in annual income to afford a median-priced starter home worth $412,778. That meant hopeful home buyers would need to earn 35% more than the $84,000 median household income in the U.S.
However, there are a number of markets in the United States that are easier for first-time homebuyers to break into, according to Zillow. The online real estate marketplace ranked the cities based on rent affordability, the share of listings that a typical household can afford, expected competition for affordable homes, and the number of similar-age families living in the area.
Best City For First-Time Homebuyers
Ranking first on Zillow's list is the housing market in St. Louis, where the average American household only spends 20% of their income on housing costs.
While the definition varies, Zillow defines a home as comfortably affordable when households spend less than 30% of their income on monthly mortgage or rental payments.
Homes in St. Louis boast a median price of $205,500, per Redfin. While it is not the cheapest in terms of median listing prices, it has the highest share of home listings that a median-income family can comfortably afford (67%).
Additionally, St. Louis' housing market has less competition, with 3.4 affordable listings for every 100 renters.
"Our average home price is under $300,000. We have very good schools. We have lots of things to do that are free," Sandy Hancock, a St, Louis brokerage owner, told Yahoo Finance in response to Zillow's ranking. "It's wonderful."
Zillow's 5 Best Housing Markets for First-Time Home Buyers
1. St. Louis, Missouri
- Percentage of median household income spent on housing: 20%
- Share of affordable home listings for median-income households: 67%
- Number of affordable listings to renter household ratio: 3.4 per 100 renters
2. Detroit, Michigan
- Percentage of median household income spent on housing: 21%
- Share of affordable home listings for median-income households: 64%
- Number of affordable listings to renter household ratio: 4 per 100 renters
3. Minneapolis, Minnesota
- Percentage of median household income spent on housing: 20%
- Share of affordable home listings for median-income households: 48%
- Number of affordable listings to renter household ratio: 2.5 per 100 renters
4. Indianapolis, Indiana
- Percentage of median household income spent on housing: 22%
- Share of affordable home listings for median-income households: 50%
- Number of affordable listings to renter household ratio: 2.6 per 100 renters
5. Austin, Texas
- Percentage of median household income spent on housing: 20%
- Share of affordable home listings for median-income households: 23%
- Number of affordable listings to renter household ratio: 1.3 per 100 renters
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