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8 Worst Cities for First-Time Homebuyers To Buy Property, According to Real Estate Experts
By Laura Beck,
1 day ago
frankpeters / Getty Images
Many of us have bought in wholeheartedly to the American Dream. We want a home, no matter what. But not all homes are created equal. More specifically, not all home locations are created equal — especially for first-time homebuyers. Some locations will cost you a lot more money than others.
Paul Gabrail, a real estate investor and founder and host of Everything Money , provided insight into what makes a city challenging for first-time buyers.
“Buying a home is a very emotional decision, and that’s great! It’s not bad,” he said. However, it’s important to remember that renting is also not a bad option. “This is especially true in markets where the median home price relative to income is very high — think San Francisco, San Jose and other parts of California,” he said.
These high-cost cities create an unfortunate double whammy for aspiring homeowners: The homes are expensive and so is the cost of living. This creates a vicious cycle that can be difficult to break, keeping many renters from their dreams of homeownership.
And here are some specific cities that first-time homebuyers should avoid.
San Francisco consistently tops the list of challenging markets for first-time buyers. Seamus Nally, CEO of TurboTenant , explained, “Generally, most people’s first home is a starter home. This means they look for a home that is usually a bit smaller than they want in the long run, or less expensive in general.”
The idea behind a starter home is simple: In theory, it’s more financially reasonable as a first property, but it allows you to build wealth toward a future, more desirable home.
With that in mind, San Francisco, with its high rents and high cost of living, is a good place to avoid.
New York City
Nally also pointed to the pricey metropolis of New York City as a place to avoid.
New York City, like San Francisco, presents significant challenges for first-time homebuyers. The combination of high property prices and expensive rental markets makes it difficult to save for a down payment and enter the housing market.
Los Angeles
Austin Glanzer, owner of 717 Home Buyers , added Los Angeles to the list of challenging cities. “Los Angeles has seen a significant rise in home prices over the years, making it a tough market for first-time buyers,” he said.
He pointed out the high cost of living and added that there is not a huge supply of housing (especially compared with the demand for it), so there are often bidding wars that can significantly raise the cost of a house.
“Additionally, the city’s vast size can make finding an affordable property in a desirable neighborhood a daunting task,” he said.
San Jose, California
Gabrail mentioned San Jose as another example of a California market where the median home price relative to income is very high. This Silicon Valley hub has seen skyrocketing home prices due to its booming tech industry, making it a difficult market for first-time buyers to enter.
Aspen, Colorado
Glanzer pointed out Aspen as another challenging market, saying, “Aspen might be known for its stunning ski resorts and luxurious lifestyle, but it comes with a hefty price tag.”
He added that the median home price in Aspen is astronomical compared with the national average, making it extremely difficult for first-time buyers to enter the market. Plus, the limited housing inventory means that competition is fierce, often requiring buyers to act quickly and bid high.
Naples, Florida
“Naples is known for its beautiful beaches and upscale lifestyle, which come at a cost,” Glanzer said.
Glanzer is especially well versed in this area, as it’s where his parents live. “The real estate market here is characterized by high property prices and strong demand from retirees and second-home buyers,” he said. “First-time buyers face significant competition and high costs, making it challenging to find affordable housing options.”
Seattle
Glanzer also pointed out Seattle’s challenges: “Seattle’s booming tech industry has driven up home prices considerably, creating affordability issues for first-time buyers. The influx of high-income tech workers has led to increased competition for homes, pushing prices even higher.”
He also shared that the cost of living in Seattle is above the national average, making it a difficult place to get your financial footing.
Austin
Gabrail also said Austin can be a difficult city for first-time homebuyers.
“The hotter or trendier the market, the harder it can be, especially when prices start to take a hit. An example of this would be Austin, Texas. Austin was experiencing multiple percentage points of growth per month at one point, however, since the COVID pandemic, it is now seeing a massive decline in pricing,” he said.
The Lone Star State’s capital city might be one to avoid if you’re in the market for your first house.
Is There Hope for First-Time Buyers in These Cities?
Despite the challenges, Gabrail offered a perspective for those set on buying in these high-cost areas.
“If you are committed to live in a specific high-priced area for a long time, it isn’t a bad idea to rent,” he explained. He said that while buying and owning a home can feel great, you need to look at your financial situation first. “If you can rent a house for $2,500 that would cost you $5,000-plus per month in mortgage, taxes, insurance and upkeep, [renting] makes more sense.”
He continued by saying that even in high-priced markets, if you can put down a reasonable payment on your house and plan to stay for a long time — we’re talking decades — buying might be the best bet for you. Again, it all comes down to looking at your finances and making an individual decision.
Get Creative
For first-time homebuyers, cities like these cities are not easy. High property prices coupled with expensive rental markets make it difficult to save for a down payment and enter the housing market.
That said, it’s always important to remember that real estate markets can vary greatly even within cities. If you have to live in any of those locales, get creative about where you live. Neighborhoods that are less established will give you more bang for your buck!
For many first-time buyers, however, it may be wise to consider more affordable markets where they can purchase a starter home, build equity and gain valuable experience in homeownership before potentially venturing into more expensive markets in the future.
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