This story was originally published on Builder.
Lending Tree was out Tuesday with a report on where home buyers can find the best deals. The top spots are in the midwest and southeast.
Several down payment variables were included in the ranking because research has identified down payments as the biggest obstacles to home ownership. The various down payment measurements are not precisely correlated, however each figure is helpful for consumers considering home ownership.
Little Rock rolls out the welcome mat.
Little Rock did not top any of the six criteria but was in the top 20 in all categories, giving it the best aggregate ranking. Its best attribute is a low average down payment of just 12 percent or $24,896. It also scores well in the share of non-prime home buyers at an even 50 percent.
Birmingham puts another southern city second.
Birmingham scored particularly well on the down payment percentage at just 12 percent with a down payment amount at just over $27,000.
Grand Rapids is the best place to be an FHA borrower.
Grand Rapids tops the rankings for non-prime credit share of FHA borrowers at 59 percent and FHA benefit with a down payment at just 22 percent of the amount paid by other borrowers.
Ohio, Pennsylvania, Michigan and Indiana present home buying opportunities.
Twelve of the Top 15 cities are in this cluster of industrial states. Access for first-time home buyers is great as home prices have not outpaced the growth in the economy and affordability is high.
On the other side of the spectrum are markets where home prices and down payments are high, the FHA share is low, and home prices exceed affordability thresholds.
Most Challenging Cities of First-Time Home Buyers:
- Denver
- New York City
- San Francisco
- Austin, Texas
- Las Vegas
- Los Angeles
- Oxnard, Calif.
- Boston
- Sacramento, Calif.
- Miami
Denver is the most challenging.
Denver is not the most challenging city in any single measure, but weak showings across the board could create obstacles for first-time buyers. Down payments are high at $66,806, and even the FHA down payment is a considerable $22,841.
Many large cities in Bottom 10.
New York, San Francisco, Los Angeles, Boston, and Miami are all in the bottom to of our listing, scoring poorly across the board in our metrics. These metros have higher income inequality than the national average and higher home prices than the national average. This puts homes out of reach for many renters who also struggle to raise down payments given high rental prices.
Some surprising cities in the Bottom 10.
Las Vegas and Austin both had very low shares of FHA and non-prime borrowers and didn't rank particularly well in other metrics. These are both very popular smaller cities that may be seeing external buyers crowding out the local population.
"In addition to tight inventory boosting prices in many markets, first-time homebuyers must now contend with rising mortgage interest rates, further reducing their buying power," said Tendayi Kapfidze, chief economist at LendingTree. "As affordability declines, borrowers should consider all the programs available to assist them in becoming homeowners, including FHA loans. A home can be a valuable asset for Americans, as long as consumers stick to homes well within their budgets."
The full report is available here.
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