The Best US Markets for First-time Home Buyers

People are looking for homes again; in some markets, it’s a great time to be a home buyer for the first time. Take Austin, Texas. Texas’s capital is becoming a buyer boomtown. People from the East and West Coasts are getting sick of high real estate prices in their area and looking for places that remind them of their coastal experiences. Many of them are finding Austin to be exactly what they need.

But Austin isn’t alone in being an excellent market for first-time buyers. What is it that defines an ideal market for first-time home buyers? We dove into the various data to identify what makes housing conditions favorable for first-time buyers. We also looked at where you can find those spots today.

5 hottest home-buying markets in the US

Let’s start with the Austin, TX case study. Bankrate.com analyzed ten different housing data points for 50 of the largest metro areas in the United States. Austin, Texas, came out on top. Cities following that were the Midwestern and Sun Belt (broadly speaking, the southern and southwestern United States) metro areas.

Their attractiveness was due to a few key factors that weighed into Bankrate’s findings:

• Affordable homes. Typically, low housing prices in an otherwise healthy market can signal the area is in an economic depression or have factors that deter buyers, like high crime rates or poor infrastructure. But for first-time buyers, if the general region is desirable, housing prices under the national median can be one of the most attractive reasons to move to an area.
• Strong local economies. It’s one thing to spot a low-priced house. But suppose the low price can be found in a metropolitan area with strong local economies, low crime rates, and plenty to do. In that case, it makes the area much more attractive to buyers.
• Few competitors. Sometimes, it’s possible to have a combination of those two variables. The problem? Other people will catch on, too. A glut of new home buyers can drive up prices, creating a gentrifying housing market and pricing first-time buyers out of the market. But if you catch on at the right time, that’s an opportunity first-time buyers can’t pass up.

If the metropolitan area performed well in all three categories, it topped the list of great cities for first-time home buyers. Here are the metros that performed well given these criteria:

1. Austin, TX

2. Kansas City, MO

3. Raleigh, NC

4. Minneapolis/St. Paul, MN

5. Jacksonville, FL

Why those metropolitan areas? Bankrate went into a little bit more detail. Austin, for example, has a booming job market, ranking first in that category. It also scored high marks for culture. Though it’s less affordable than some other markets, Bankrate still viewed Austin as a unique home-buying opportunity.

Kansas City scored well in both market saturation and affordability. However, its job market and “wellness/culture” rating pulled it below Austin’s. Raleigh’s claim to fame is that it’s not very competitive: the market is more balanced, meaning it’s easy for first-time home buyers to swoop in, make an offer, and get accepted.

The Twin Cities feature plenty of job growth, not to mention jobs that are easy to reach if you commute. It boasted a strong “overall” score, with no particular weakness. Finally, Jacksonville rounded out the top five by placing top ten in both the job market and the lack of tightness in the market.

How to spot a hot housing market

It’s tempting to believe that a hot housing market is one in which there are many closed sales, with many buyers competing for the few sellers. This drives up prices, creates bidding wars for the existing housing supply, and is generally great for home sellers.

But markets that work well for first-time home buyers are different. A good housing market for this bracket has in-demand jobs and amenities that make people want to live there, but the real estate market hasn’t quite caught up yet to its desirability. Typically, a desirable area like Austin, TX, attracts buyers, which drives home prices up as demand for houses soars.

But real estate doesn’t always work like that. Sometimes, real estate prices can take a while to catch up. Austin, TX, is only a buyer’s market for the moment. Right now is a unique opportunity: don’t expect home prices in these desirable markets to remain low enough to be kind to potential buyers.

The key is to spot the boom towns before a larger swath of the market discovers them. But in some cases, the growth of an area can lead to opportunities that go on for years. For example, the recent growth in Austin has meant that even an influx of new home buyers from the east and west coasts haven’t been able to gobble up all of the demand.

It’s also worthwhile to take a national view. For instance, Goldman Sachs in January 2023 listed Austin as one of the four markets it predicts has a housing crash on the horizon. This means that even with all that’s going on in Austin, other market factors could depress the price of homes for a while. It likely won’t always be this way. But for savvy first-time home buyers, a temporary “glitch” in the market can mean a unique opportunity.