Think San Francisco or New York City would be the most challenging place to buy your first home? Nope—first-time home buyers will struggle far more in Denver. Really.
This surprising finding comes from LendingTree’s just-released list of the best and worst cities for first-time home buyers. LendingTree researchers ranked the 100 largest U.S. cities not only by the price of homes, but also by other criteria such as the average down payment, the percentage of buyers who have a credit score below 680, and the number of homes sold that the median-income family can afford.
And Denver, it turns out, really gives first-time home buyers a run for their money, due in part to sizable down payments—on average $66,806, or 18% of a home’s price.
“This makes it harder for first-time home buyers who may need years of savings to compete,” Brian Karimzad, vice president of research at LendingTree, tells realtor.com®. Even FHA borrowers, who typically have smaller down payments than those taking out conventional loans, are putting more money down in Denver than in other metros, he says.
Colorado’s housing market as a whole is also one of the tightest in the nation, according to a 2017 report from Bankrate.com. Both Denver and Colorado Springs regularly make realtor.com’s monthly list of the hottest markets for real estate in the U.S.
“Something I heard again and again is that first-time home buyers suffer in a tight market. Sellers are getting multiple offers,” Bankrate.com analyst Claes Bell told the Denver Post. “Because first-time buyers tend to be financing a large amount of their purchase relative to other buyers, they may get short-changed.”
Of course, New York City and San Francisco are also on the list of challenging markets for first-time home buyers, followed by a few more surprises such as Austin, TX, and Las Vegas. Both are “very popular smaller cities that may be seeing external buyers crowding out the local population,” Karimzad says.
LendingTree’s data suggest that the worst cities for home buyers tend to have some things in common: They’re markets where home prices and down payments are high, the share of FHA loans is low, and home prices exceed what the average family income can afford.
Here’s a full rundown of the most challenging cities for first-time home buyers.
Worst cities for first-time home buyers
- Denver, CO
- New York City, NY
- San Francisco, CA
- Austin, TX
- Las Vegas, NV
- Los Angeles, CA
- Oxnard, CA
- Boston, MA
- Sacramento, CA
- Miami, FL
Among the most accessible cities for first-time home buyers, Little Rock, AR, claimed the No. 1 spot. This Southern city sees a low average down payment of just $24,896, or 12% of a home’s price.
“Lower down payments increase access for first-time buyers,” says Karimzad. He also says low credit scores are a factor in the Little Rock housing market. “Competition is not as fierce for first-time home buyers in Little Rock, since 50% of home buyers have less-than-prime credit.”
A handful of Rust Belt cities also appeared on the list of best cities for first-time home buyers. The reason: Homes there are still affordable, since real estate prices have not outpaced the growth in the economy, making them ideal locales for first-time home buyers.
Here are the other cities that made the list.
Best cities for first-time home buyers
- Little Rock, AR
- Birmingham, AL
- Grand Rapids, MI
- Youngstown, OH
- Winston, NC
- Dayton, OH
- Indianapolis, IN
- Scranton, PA
- Pittsburgh, PA
- Cincinnati, OH