Orlando FLorida downtown

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Today, first-time homebuyers in the US are facing considerable affordability issues, with national home prices continuing to climb due to lack of inventory. But, housing markets in the South and Midwest could offer the most possibilities for first-time buyers, according to a newly released report by the listing site Zillow.

First-time homebuyers accounted for more than half of recent homebuyers in 2016, says Zillow. And more than two-thirds of renters claim saving for a down payment is the biggest obstacle keeping them from homeownership.

But, in nearly all of the top 10 most favorable markets for first-time homebuyers, median home values were actually below the national average — which in turn equates to a lower down payment.

And although generally markets on the West Coast have strong job markets, they are also considerably less affordable for first-time homebuyers. For example, a 5 percent down payment in the San Francisco Bay Area is larger than a 20 percent down payment in almost all of the markets that made the top 10, says Zillow.

In order to determine the top markets for first-time homebuyers, Zillow applied five metrics to its listings, including the lowest median home values (for a lower down payment), the markets that had the most listings with price cuts (indicative of a less competitive market) and markets with a high inventory.

Orlando, FL, where the median home value was just under $203,000, was named the overall best market for first-time buyers. The market has relatively more inventory and a fairly short “breakeven horizon” — the number of years after which buying becomes more financially sensible than renting. Orlando’s breakeven horizon came in at a little under two years, says Zillow.

Tampa, another market in the Sunshine State, landed in the number two spot. The median home value in Tampa is $183,300, and just under 19 percent of listings had price cuts. The breakeven horizon in Tampa is one year and 10 months, slightly below Orlando. Tampa also has a good selection of homes for sale compared to other markets.

Indianapolis, IN rounded out the top three, with a median home value of $137,300 and a breakeven horizon of one year and six months — the lowest of all the markets in the study.

The other top 10 favorable markets for first-time homebuyers were Las Vegas, NV, San Antonio, TX, Pittsburgh, PA, Atlanta, GA, Detroit, MI, Dallas, TX, and Cleveland, OH.

Young Millennials are facing a particularly challenging market as they age into becoming home buyers for the first time.

“As Millennials reach the typical home buying age, they are coming into a tough housing market with low inventory and lots of competition,” says Zillow chief economist Dr. Svenja Gudell.

And while more “challenging” metros shouldn’t necessarily be crossed off a first-time homebuyer’s wish list, buyers should be prepared for a more competitive buying market, adds Gudell.

Click here to read the entire report.

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