Where Can Renters Afford to Become First-Time Buyers?


Buying a first home is something most people aspire to. Of course, the ability to do it is largely dependent on where they live, or want to live. So where can first-time buyers actually afford a home? A recent study sought to answer that question by considering the income of renters, who, after all, are prospective new owners.

The study by First American Financial Corporation, a company offering title insurance and related services, looked at what a median-earning renter could afford to buy in America’s 50 largest metropolitan areas during the third quarter of 2019. (These were government-defined metro areas, including surrounding counties that were socioeconomically tied to their cities by commuting.)

The 50 areas were ranked according to the percentage of homes that were affordable to local median-earning renters. Smaller metros, like the Oklahoma City area (at the top of the list) won out. There, the median sale price was just $160,000, while the median-earning renter could qualify to purchase a home costing as much as $230,099. In all, 74 percent of the area’s homes were within reach.

Not surprisingly, more expensive metros fell to the bottom, with California cities taking the last five spots on the list. In the Los Angeles area, the median home sold for $645,666, while the median-earning renter could afford one costing $314,961 or less. Just 6 percent of homes were considered affordable.

To determine what was affordable to median-earning renters in each area, the study assumed a modest 5 percent down payment and considered sale prices, mortgage rates, property taxes and mortgage insurance. House payments and other debt could make up no more than one-third of a median renter’s earnings. The researchers applied the criteria to sales in the third quarter of 2019, when mortgage rates hit longtime lows. (Rates have since dropped, potentially making more homes available.)

Below, the 10 metros with the largest share of homes affordable to median-earning renters, and the 10 with the smallest, based on the study’s rankings.



Sahred From Source link Real Estate

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