Earlier this week, HousingWire had an article telling first-time homebuyers (Millennials) in Dallas, Texas that they should just adjust to being renters since land and development costs make a sub $200,000 new home almost impossible. To read the article click http://www.housingwire.com/articles/36878-hey-dallas-millennials-better-get-used-to-renting
As I have written in the past, home builders continue to face three headwinds since the housing bubble burst:
- They an out of developed lots (having done hardly any new land development from 2008 through 2012) and those remaining and newly developed ones at higher prices almost dictate that the new home is no longer an entry-level property, but rather higher-end
- After going from 1.3 million new home sales per year at the peak to 300,000 in the trough, almost three-fourths of the workers in the home building industry got a job in a different line of business and are not coming back. Builders continue to face an ongoing shortage of skilled workers
- Construction costs continue to surge making every new home built even more costly
Once again I invoke the TINSTAANREM clause — There Is No Such Thing As A National Real Estate Market. Each real estate market is different. Ditto the economy. There are many markets across the country very affordable for entry level homebuyers. Yes, not only can Millennials afford a home, but in many markets, owning is cheaper than renting.
Zillow examined markets across the country calculating how much of local median monthly income a consumer would have to spend on rent or mortgage payments for a medium priced home or apartment. Other factors in their analysis included median rents and home values, available inventory of first-time homes and the competition from all-cash offers. They assume, a 20 percent down payment using a 30-year fixed-rate mortgage at current rates.
So where are the best (and worst) markets for first-time homebuyers? In the 10-best markets for first-time homebuyers, all of the markets except Chicago have median prices less than the U.S. overall.
Given housing costs, California has one-half of the 10 worst first-time homebuyer markets in the country. Regardless of housing costs, however, people will still gravitate to the higher-cost markets given employment considerations.
To read the entire Zillow press release click http://zillow.mediaroom.com/2016-04-27-Indianapolis-and-Pittsburgh-Named-Best-Markets-for-First-Time-Home-Buyers
Granted, the 20 percent down payment is a hurdle to many, but for some markets owning is so much less than renting that the down payment is getting a tremendous return on investment.