10 Best Housing Markets for First-Time Homebuyers

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By Andrea V. Brambila

As a group, first-time homebuyers are a bellwether of the real estate industry and the economy as a whole.

"What helps a first-time homebuyer is having a job and a good income to buy a home -- having hope for the future," said Mark Fleming, chief economist for data aggregator CoreLogic.

In order to identify 10 markets that are likely to have a higher-than-average share of first-time buyers, Inman News requested data from the U.S. Department of Housing and Urban Development on first-time homebuyers with loans backed by the Federal Housing Administration.

The following are the 10 most popular areas in the U.S. for these first-time buyers. Four of the markets are in California's Central Valley, three are in the South, two are divisions of the Philadelphia-Camden-Wilmington metropolitan area in the Northeast, and one is in the Midwest.

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10 Best Housing Markets for First-Time Homebuyers

Population estimate (2011): 709,567
Percent of total sales to first-time buyers with FHA loans: 31%
Median sales price for new and existing homes (Q1 2012): $170,000

Located between Baltimore and Philadelphia, the Wilmington metro had the highest share of total sales made to first-time buyers with FHA loans in the U.S. last year, 31 percent, more than double the 15.3 percent rate at the national level. FHA loans overall accounted for nearly 40 percent of sales in the Wilmington area, compared with a fifth of sales nationwide.

"I think with a combination of lower prices and great interest rates plus a good economic base we have a lot of first-time buyers," said Dave Iliff, an agent at Patterson Schwartz Real Estate in Hockessin, Del.

"They are using FHA as conventional is still requiring at least 10 percent down payment, for the most part, and FHA is much more buyer friendly at (a) 96.5 percent (loan-to-value ratio)."

Read more at Inman News.

Photo: Flickr/Gravgirt

Population estimate (2011): 303,674
Percent of total sales to first-time buyers with FHA loans: 30.7%
Median sales price for new and existing homes (Q1 2012): $131,500

While every other market on this list has experienced at least a 25 percent drop in home prices from its peak during the housing boom, the Charleston metro never had a boom to bust.

"Being nestled within the hills of the Appalachians can have its pros and cons depending on how you view it. When it comes to the housing market, this isolation is a pro because we don't see much of any type of downturn," said Bret Nida, an agent at Real Estate Central in South Charleston.

"The cost of living here is very appealing. If you would take a three-bedroom, two-bath home with a two-car garage and put it in Northern Virginia, you would pay close to $400,000 depending on where it's located. Here in Charleston, that home is $140,000."

Read more at Inman News.

Photo: Flickr/puroticorico

Population estimate (2011): 449,253
Percent of total sales to first-time buyers with FHA loans: 30.5%
Median sales price for new and existing homes (Q1 2012): $118,000

Visalia-Porterville is one of four metro areas featured on this list that are located in the heart of California's agricultural center, the Central Valley.

With 18.3 percent unemployment in March, the Visalia area, like other Central Valley markets on this list, had an unemployment rate more than twice the national rate. Moody's Analytics projects the area will see 1 percent job growth in 2012, below the growth expectations for the nation as a whole.

Not surprisingly, the area has also consistently had one of the highest foreclosure rates in the nation. In the first quarter, the area had the 10th-highest rate with 1 in 89 units receiving a foreclosure filing.

Read more at Inman News.

Population estimate (2011): 259,898
Percent of total sales to first-time buyers with FHA loans (2011): 29.6%
Median sales price for new and existing homes (Q1 2012): $107,000

North of Visalia, along Route 99, is Merced, the smallest metro area on this list with just over 250,000 inhabitants.

The housing downturn hit the Merced market particularly hard. The area had the fifth-highest foreclosure activity rate in the nation in the first quarter with 1 in 72 units receiving a foreclosure filing. More than half of the area's overall sales in the fourth quarter (53.9 percent) were distressed.

The area's 20.2 percent unemployment rate is one of the highest in the nation. It is also one of only two metros on this list where the job market is expected to contract, with a projected 0.8 percent decline in jobs this year.

Read more at Inman News.

Photo: Flickr/stray-kat

Population estimate (2011): 942,904
Percent of total sales to first-time buyers with FHA loans (2011): 28.8%
Median sales price for new and existing homes (Q1 2012): $135,000

When public defense attorney and first-time homebuyer Sergio Benavides decided to buy a home in Fresno after years of renting, his main concern was getting conned.

"I'm an attorney, and I read a lot. I know how the economy was destroyed by the housing market, and I did not want to be just another victim," he said.

Benavides obtained financing for his purchase through his local credit union, which he felt would have his best interests in mind, and chose an FHA loan.

Read more at Inman News.

Photo: Flickr/Great Valley Center

Population estimate (2011): 271,488
Percent of total sales to first-time buyers with FHA loans (2011): 27.5%
Median sales price for new and existing homes (Q1 2012): $145,000

Government-guaranteed loans are hugely popular among first-time homebuyers in the Hagerstown-Martinsburg area, according to Cynthia Smith, a mortgage consultant at Prosperity Mortgage Company in Martinsburg.

Forty-five percent of the first-time buyers in the market use FHA loans, 50 percent use USDA loans and only 5 percent use conventional loans, Smith said.

"Everyone is seeking a no or low down payment program," she said.

Read more at Inman News.

Population estimate (2011): 518,522
Percent of total sales to first-time buyers with FHA loans (2011): 27.3%
Median sales price for new and existing homes (Q1 2012): $127,000

As with the other Central Valley markets on this list, economic indicators for the Modesto market tend toward the extreme. The median sales price in the Modesto market peaked at $387,000 in the fourth-quarter of 2005 -- more than 50 percent higher than the national peak that same quarter, $254,000.

Since then, the Modesto area's median price has sunk 67.4 percent, to $127,000 -- the second-biggest decline among the 10 markets on this list.

The Modesto area had the second-highest foreclosure rate in the nation in the first quarter: 1 in 60 units received a foreclosure filing. The area also had the highest share of distressed sales among the 10 markets in the fourth quarter: 61 percent.

Read more at Inman News.

Photo: Flickr/Tim Hilton

Population estimate (2011): 3,318,486
Percent of total sales to first-time buyers with FHA loans (2011): 27%
Median sales price for new and existing homes (Q1 2012): $158,000

First-time homebuyers are "a major force" in the Minneapolis-St. Paul-Bloomington market, according to Aaron Dickinson, a board member of the Minneapolis Area Association of Realtors and a broker associate at Edina Realty in Champlin, Minn.

"Our unemployment rate is far lower than the national average, and unemployment hits the younger generations harder. We therefore are highly likely to have more first-time borrowers with stable jobs and the ability to purchase," Dickinson said.

The Twin Cities market had the lowest unemployment rate among the 10 markets in March, 6.1 percent. The area is also expected to see the highest job growth among the 10 between fourth-quarter 2011 and fourth-quarter 2012: 3 percent.

Read more at Inman News.

Photo: Flickr/philipshannon

Population estimate (2011): 5,359,205
Percent of total sales to first-time buyers with FHA loans: 27%
Median sales price for new and existing homes (Q1 2012): $122,000

The Atlanta metro area's median sales price peaked in third-quarter 2006 at $186,000. As of the first quarter, the median was down 34.4 percent, to $122,000, considerably lower than the national median.

"I think for the greater Atlanta area, the downturn was a market correction that needed to happen," said Stacy Carter, associate broker at Better Homes & Gardens Real Estate Metro Brokers in Roswell, Ga.

"Home prices were escalating at an unhealthy and unsustainable rate while at the same time, builders were building new homes from the $400,000s and up, leaving a huge gap in the $150,000 to $250,000 price point for new homes.

Read more at Inman News.

Photo: Flickr/Payton Chung

Population estimate (2011): 1,251,921
Percent of total sales to first-time buyers with FHA loans: 26.6%
Median sales price for new and existing homes (Q1 2012): $168,000

Art director Diane Kidawa, 38, and her husband waited until the Camden market "settled" to purchase their first home last September in Medford Lakes, N.J. The sales price for their three-bedroom, two-bathroom home was $211,000. They bought it with a USDA loan and a 3.5 percent down payment.

Kidawa's biggest fear about owning a home was not negative equity -- the couple plans to stay in home for at least 30 years -- but rather "staying employed so I can pay for it," she said.

Her husband currently stays at home with their children but is in search of a full-time job.

Read more at Inman News.

Photo: Flickr/MikeSheridan89

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See also:
First-Time Homebuyer's Guide

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