With  14% more people becoming first-time homeowners last year compared to the previous year, a new report offers 2021’s Best & Worst Cities for First-Time Home Buyers.

To determine the most favorable housing markets for first-time buyers, WalletHub.com took the pulse of real estate in 300 cities of varying sizes using 22 key metrics. The data set ranges from housing affordability to real-estate tax rate to property-crime rate.

Best Cities for First-Time Home BuyersWorst Cities for First-Time Home Buyers
1. Chesapeake, VA291. Boston, MA
2. Gilbert, AZ292. Burbank, CA
3. Lincoln, NE293. Glendale, CA
4. Cape Coral, FL294. Santa Barbara, CA
5. Boise, ID295. San Mateo, CA
6. Hampton, VA296. Los Angeles, CA
7. Peoria, AZ297. Santa Monica, CA
8. Virginia Beach, VA298. San Francisco, CA
9. Norfolk, VA299. Oakland, CA
10. Surprise, AZ300. Berkeley, CA

Best vs. Worst

  • Toledo, Ohio, has the most affordable housing (median house price divided by median annual household income), with a ratio of 1.06, which is 19.1 times cheaper than in Santa Barbara, Calif., the city with the least affordable housing, with a ratio of 20.29.
  • Honolulu has the lowest real-estate tax rate, 0.29 percent, which is 12.9 times lower than in Waterbury, Conn., the city with the highest at 3.74 percent.
  • Rochester, N.Y. has the highest rent-to-price ratio, 15.88 percent, which is 4.7 times higher than in Sunnyvale, Calif., the city with the lowest at 3.38 percent.
  • New Orleans has the lowest total home-energy cost per month, $97.27, which is 4.8 times lower than in Honolulu, the city with the highest at $470.38.

Experts weighed in on the topic to help first-time home buyers.

What should first-time home buyers consider when choosing a neighborhood?

“There are clear factors to consider in affordability, safety, commute to work, and neighborhood amenities such as parks and walking trails, but, if there is one key consideration that first-time homeowners should keep at the forefront of their mind, it is the exit strategy. That is, the homeowners are first-time buyers and will likely wish to step up in a few years. Will the home and neighborhood be attractive to future first or second-time homebuyers? I recommend that first-time homebuyers make a list of the musts and wants for them as well as their perceived musts and wants for other buyers,”  said Patricia A Ryan, an associate professor at Colorado State University.

“Neighborhood characteristics such as desirable amenities, proximity to conveniences such as shopping, and perceptions around school quality are examples easily understood. However, there is a more complex real estate consideration. For example, regression/progression is the concept that home values can be impacted by the value of homes in surrounding neighborhoods. Choosing a neighborhood means not only choosing it as it is now but considering future building and/or zoning plans for the impact such changes might have on current and future appraisal values,” said Vanessa Boney Dutra, an associate professor at the University of Denver.

How do you know that you are financially ready to buy your first home?

“Being financially responsible plays a critical role in whether you should purchase a home. Having a job with consistent income without living paycheck to paycheck is important. There is no shame in renting for a while and saving money to be able to afford the home that you truly want. Being able to save and not spend more than you make is a good indication that you may be ready to become a homeowner. First-time buyers need to understand that owning a home is not just about paying the mortgage each month. You also must furnish the home, pay property taxes, maintain the lawn, and make repairs as needed. If you can handle all of those responsibilities, it might be time to purchase,” added Gin Starling McPhail, a realtor/associate broker; lecturer at Georgia Southern University.

“Your credit score matters significantly when you buy your first home. Frequently monitoring and constantly trying to improve your credit score is helpful during the preparation. Most favorable financing rates and terms are usually for buyers with scores higher than 680. In addition, a stable income stream is important to indicate your ability to pay and also helps yourself to find out how much you can reasonably afford. Many potential first-time buyers often delay their purchases because they are looking at homes out of their affordability range,” added Ran Lu-Andrews, Ph.D., CFA, a program director, Undergraduate Business Administration Program, School of Management at California Lutheran University.

In what ways has the COVID-19 pandemic changed the home-buying process? Will there be any long-lasting effects of the current economic downturn that first-time buyers should consider?

“The supply of homes was extremely limited during the pandemic because would-be sellers did not want people walking through their houses (which caused home prices to soar). Video/virtual tours have become more popular. This was a trend anyway, but still with such a large, infrequent, and unique purchase buyers still want to lay eyes directly on the property before buying.
Do not be afraid of missing out on your opportunity to buy a home because home prices are going up so quickly. FOMO makes people want to buy even during over-priced times but know the rent-buy equilibrium will find its rightful balance again,” added
Michael J. Seiler, a professor at College of William & Mary.

“Sellers and their agents have gotten savvier about posting virtual tours, 3D models, and even aerial photography of their homes. This is all great and can help buyers make more informed decisions about potential purchases. However, I have heard anecdotal reports of an increase in home buyers making offers and closing transactions without visiting a property themselves. This is never a good idea and is more likely to lead to buyer’s remorse. Regarding the economic effects of COVID-19, I am extremely concerned about the potential for an increase in evictions and foreclosures in Q3 and Q4 2021, as various moratoria expire,” said Bart McLeroy, MS, MBA, a professor at Collin College, Frisco Campus.

Source: WalletHub