Where Affordability And Buyers' Desires Meet

With home prices high after post-pandemic appreciation and mortgage rates hovering close to 7%, affordability is – and is likely to remain – a key barrier to higher origination volumes. Then, where is a first-time homebuyer to find a place to purchase?

A new report from real estate marketplace Realtor.com adds some insight, looking at roughly 3,600 Census-Designated Places that are located within the 100 largest metropolitan areas in the country and scoring them on a variety of factors. Those criteria included the ratio of median listing price to the median income of 25- to 34-year-olds in those locations, in an effort to ascertain affordability.

The top 10 markets were: 

1. Harrisburg, Pa., with 16.8% forecasted sales growth in 2025; 
2. Rochester, N.Y., with 8.7% forecasted sales growth in 2025;
3. Villas, Fla., with 13.2% forecasted sales growth in 2025;
4. Lauderdale Lakes, Fla., with 24% forecasted sales growth in 2025;
5. Altamonte Springs, Fla., with 15.2% forecasted sales growth in 2025;
6. Lansing, Mich., with 10.3% forecasted sales growth in 2025;
7. North Little Rock, Ark., with 18.6% forecasted sales growth in 2025;
8. Baltimore, Md., with 16.2% forecasted sales growth in 2025;
9. Tonawanda, N.Y., with 9.7% forecasted sales growth in 2025; and
10. Wilmington, Del., with 12.3% forecasted sales growth in 2025.

The report also considered average commute time to work as well as location scores of each place, including things like availability of shopping, day care, restaurants, grocery stores, and nightlife. Interestingly, because of all the weighting criteria, Realtor.com's top-10 ranking does not directly (and perhaps more simply) correspond to sales growth the company forecast for this year. 

Compared with December 2023, the national median listing price of homes on Realtor.com last month was down an average of -1.8% to $402,502, which is still 34.2% higher than December 2019. All of these top-10 Census-Designated Places have median listing prices well below that level. 

For instance, the median listing price of the report’s number-one market for first-time homebuyers, Harrisburg, is $140,000. Lauderdale Lakes, which has the highest predicted sales growth at 24%, has a median listing price of $154,850, according to Realtor.com, and North Little Rock, with its 18.6% forecasted growth, has a median listing price of $160,000.  

"If mortgage originators are hoping to increase the volume of loans made out to first-timers this year, they may have to sweeten the deal a bit to attract them to a market that has near-7% mortgage rates and soft rents, which aren't encouraging renters to convert into homeowners," Joel Berner, senior economist at Realtor.com, told NMP. "This could include offering buydowns or special below-market rates, or expanding their approval criteria to incorporate first-timers with potentially thinner credit files who are moving from expensive metros to more affordable ones like the 10 on our list."

What Buyers Are Looking For

Bright MLS, a real estate multiple listing service, issued a report today assessing what homebuyers are looking for to make a purchase.

Most would be willing to sacrifice house size and location just to land a home that's move-in ready. 

Combined with Realtor.com's findings on buyer affordability, Bright MLS's insights on buyer priorities can help loan officers consider the efforts that might help young homebuyers off the sideline.

Polling nearly 700 prospective homebuyers who currently rent or live with others but did not own a home as of December, 56.1% said buying a home that’s move-in ready and requires no repairs is “very important,” while another 37.8% said move-in-ready is “somewhat important” to them.

Other findings from the survey include: 

• 53% of respondents ranked number of bedrooms as the most important feature; 
• 54% ranked distance from job/commute as the most important location feature; and 
• Nearly three-quarters said they would consider purchasing a smaller home and nearly two-thirds indicated they would be willing to buy a home outside of their preferred neighborhood. 

"Our survey found that while prospective buyers realize that trade-offs are often necessary,” said Bright MLS Chief Economist Lisa Sturtevant, “they are more likely to compromise on the size of the home and location before giving up on their dream of finding a home in move-in-ready condition."