Best Cities for First Time Homebuyers
- August 31, 2018
- Posted by: Mike Brown
- Category: Study
Buying your first home can be an incredibly exciting time, but it can also be a stressful process that creates serious long term consequences.
Of course, consequences are not one-way and can either be good or bad.
If you purchase a home in a great neighborhood, you can provide your children with safety, a rewarding education, beautiful weather, and plenty of entertaining activities. On the economic side of things, you want your first house to be affordable and to have low taxes. Also, a first home can become a strong asset if you can maintain a high resale value.
Contrarily, purchasing a first home without doing thorough research can lead to a bad situation for your kids, amongst other things. If you want to relocate, you may have a tough time selling a house in an undesirable neighborhood. If you are lucky enough to sell your home, then you must go through the arduous process of buying a house, again.
To help as many people make their first home purchase their only home purchase, LendEDU has named the 500 best cities in the U.S. for first time homebuyers.
This report used licensed data from Onboard Informatics and Experian’s Premier Aggregated Credit StatisticsSM dataset to evaluate over 30,000 U.S. towns and cities. This study used a unique scoring method to narrow the list down to the 500 places most conducive for first time homebuyers; cities were judged on a 100 point scale with a higher score meaning a better ranking.
To develop that score, a multitude of parameters were evaluated for each town and city, including: (1) Median Household Income; (2) Median Household Value; (3) Mortgage Success Rate; (4) Property Tax Rate; (5) Crime Risk Index; (6) Weather Risk Index; (7) Cost of Living Index; (8) Entertainment Cost Index.
LendEDU’s report, “Best Cities for First Time Homebuyers,” has identified the 500 towns and cities in the U.S. that offer the most reward for those buying their first home.
500 Best Cities for First Time Homebuyers
Data for this report was pulled mainly from Onboard Informatics as licensed by LendEDU; additionally, some data from Experian’s Premiere Aggregated Credit Statistics, as licensed by LendEDU, was used in the study. Overall, over 30,000 ZIPTM1 codes were analyzed, which resulted in a list of 500 towns and cities that were deemed the most ideal for first time homebuyers. Several metrics were taken into account for calculations and scoring that ultimately factored into the final score for a given area.
Overall, nine metrics were pulled from Onboard Informatics (median household income, median household sale price, median property tax value, cost of living index, crime risk index, weather risk index, cost of entertainment index, number of households, and population) and only one metric was pulled from Experian (percentage of mortgages in the area that were never derogatory, dubbed Mortgage Success Rate).
During data processing, areas were broken out by ZIP CodeTM and matched accordingly with their geographical names and states of location. In many cases, there were multiple ZIP codes that shared the same geographical names and states of location. Since these ZIP codes pertained to the same geographic locations, data from these ZIP codes were aggregated together, resulting in a single row of data weighted by either population or the number of households in the area.
In order to determine which area was ideal for first time homebuyers, some of these metrics were used in calculations together to form a unique scoring metric while other metrics were simply scored by themselves as stand-alone scoring metrics.
Starting with the stand-alone metrics, the cost of living index, Mortgage Success Rate, crime risk index, weather risk index, and cost of entertainment index were ranked and scored by themselves for each area. Each individual stand-alone scoring metric for an area was ranked against the field, resulting in a percentage score. This percentage was multiplied by a weight to determine its final score. Maximum scores for each stand-alone scoring metric: cost of living index – 10 percent; Mortgage Success Rate – 10 percent; crime risk index – 20 percent; weather risk index – 10 percent; and cost of entertainment index – 20 percent.
Median household income, median household sale value, and the median property tax value were used in calculations to determine two different scoring metrics. Median household income was divided by median household sale value to gauge the affordability of a given area. The median property tax value was divided by the median household sale value to gauge the value of households relative to property value. The household income/value scoring metric was weighted 20 percent while the household property tax/value scoring metric was weighed 10 percent.
All individual scoring metric metrics were superimposed together, resulting in the final score. Greater final scores indicated that an area is more ideal for first time homebuyers, offering a better home value relative to taxes and income, greater chance of success with mortgage payments, lower risk of crime, lower risk of weather disaster, lower cost of entertainment, and lower cost of living.
1. Experian is a nonexclusive full-service provider licensee of the United States Postal Service®. The following trademarks are owned by the United States Postal Service®: ZIP and ZIP Code. The price for Experian's services is not established, controlled or approved by the United States Postal Service.