Best and Worst U.S. Cities for First-Time Homebuyers

A recent WalletHub report evaluated 300 U.S. cities to identify the best and worst options for first-time homebuyers. The assessment spanned 22 indicators, focusing on affordability, real estate market conditions, and quality of life. While some cities in Florida and Arizona are promising for newcomers, Berkeley, California, ranks as the least favorable for those entering the housing market.

Challenges in Home Buying

Buying a first home is increasingly difficult due to high home prices and mortgage rates. Last year, first-time buyers represented only 21 percent of the market, falling from a historical average of 40 percent, as per the National Association of Realtors. This trend points to a worsening affordability issue, compounded by the 30-year fixed mortgage rate, which reached 6.49 percent on July 9, a rise from 6.43 percent the prior week, according to Freddie Mac.

Worst Cities for First-Time Homebuyers

Berkeley, California, is deemed the worst city for first-time homebuyers among the 300 cities analyzed. Nine of the ten lowest-ranked cities are in California, with Anchorage, Alaska, as the non-California exception. WalletHub’s evaluation considered affordability, real estate market conditions, and quality of life, using various indicators like housing costs, taxes, listings, building permits, and crime rates.

Berkeley landed in 300th place, scoring 27.97 overall. It was ranked 296th in affordability, 299th in the real estate market, and 281st in quality of life. WalletHub analyst Chip Lupo noted that the lowest-ranked cities typically face combined challenges like high housing costs relative to local income levels, limited housing inventory, and fewer new homes, reducing affordable options for buyers. Poor quality-of-life factors such as crime, job market strength, or overall affordability also weigh heavily.

Alex Beene from the University of Tennessee at Martin highlighted that the first-time buyer market is becoming geographically selective, with opportunities growing in Sun Belt and midsize markets.

10 Worst Cities for First-Time Homebuyers

The cities that ranked poorly are heavily clustered along the California coast, near Los Angeles and the Bay Area, including Berkeley, Santa Monica, Santa Barbara, San Francisco, Los Angeles, and San Mateo. New York City is also near the bottom, positioned 288th overall due to its affordability, market conditions, and quality of life standings.

Kevin Thompson, CEO of 9i Capital Group, remarked that optimal cities for first-time homebuyers encompass more than just home price. Factors like weather, cost of living, job opportunities, and quality of life are crucial considerations.

WalletHub limited its analysis to city boundaries, excluding surrounding metro areas. Cities were categorized by size, with large cities having over 300,000 people, midsize cities between 150,000 and 300,000, and small cities fewer than 150,000.

Best Cities for First-Time Homebuyers

While California houses most of the worst-ranked cities, Florida, Arizona, and other Sun Belt areas topped the list. Palm Bay, Florida, is ranked highest overall, scoring 65.94. It excelled in real estate market conditions and quality of life, though less so in affordability.

Palm Bay stands out for its active home listings and building permits per capita. The city boasts the fourth-highest millennial homeownership rate, and home values surged by 107 percent from 2018 to 2024.

Other leading cities include Surprise, Arizona; Gilbert, Arizona; Tampa, Florida; and Yuma, Arizona. These cities combine affordability, housing availability, and long-term value. Low crime rates, reasonable real estate taxes, and strong millennial homeownership rates also make them attractive for new buyers.

Surprise excelled with a high volume of new building permits and a notable low crime rate. Gilbert shined for its low real estate taxes and a significant millennial homeownership rate.

Michael Ryan of MichaelRyanMoney.com points out that the first-time buyer market is now fragmented, with accessible pockets for young buyers in contrast to markets where ownership is inherited or delayed.

Future Outlook for First-Time Homebuyers

Challenges are likely to persist for first-time buyers if home prices and mortgage rates stay high. Location is a vital factor for those entering the market. Buyers in poorly ranked cities might face particularly tough hurdles.

“Beyond housing affordability, you have to look at the broader economics and quality of life,” noted Kevin Thompson. “If the cost of living continues to rise and local wages and job opportunities are not keeping pace, that is simply not conducive to good outcomes for first-time homebuyers.”