California Metros Top List of Least Affordable Cities for First-Time Homebuyers

While buying a home, otherwise known as achieving the American Dream, is an exciting and important milestone for many Americans, housing costs remain unaffordable for many, on top of elevated home prices and historically high mortgage rates.

According to a new analysis from WalletHub, first-time homebuyer purchases make up a sizable chunk of the market. In 2022, some 26% of home purchases were made by first-time homebuyers, down from 34% the previous year due in part to surging prices.

"Homebuying can be an emotional decision, especially for first-time buyers," said Kevin J. Boyle, Willis Blackwood Director, Blackwood Department of Real Estate, Pamplin College of Business at Virginia Polytechnic Institute and State University. "It is important to keep a business consideration balanced with the excitement of the first-time purchase. Buyers need to keep in mind the full cost of ownership, not just the payment, taxes, and insurance that are escrowed but also anticipated upgrades and maintenance, as well as income tax savings."

Top 10 Best Cities for First-Time Homebuyers

1. Palm Bay, FL
2. Cape Coral, FL
3. Tampa, FL
4. Port St. Lucie, FL
5. Orlando, FL
6. Surprise, AZ
7. Gilbert, AZ
8. Boise, ID
9. Chesapeake, VA
10. Henderson, NV

"If you have to stretch your savings to make less than 15% (20% is ideal), you should either find a less expensive home or wait and save more," said Georgette Chapman Phillips, Kevin L., and Lisa A. Clayton Dean at Lehigh University, College of Business. "More importantly, do not be tempted by a low-down payment adjustable mortgage to help you reach your 'dream house'."

Top 10 Worst Cities for First-Time Homebuyers

1. Daly City, CA
2. Burbank, CA
3. San Mateo, CA
4. Oakland, CA
5. San Francisco
6. Los Angeles
7. Santa Barbara, CA
8. Anchorage, AK
9. Santa Monica, CA
10. Berkeley, CA

"Buying a house entails more than just the monthly mortgage payment and gathering the down payment," said Jake Wegmann, Associate Professor, School of Architecture at University of Texas at Austin. "You also need to consider utility costs—for instance, if you live in a hot climate region, your electrical bills will be much higher in the summer."

Most Affordable Cities for First-Time Homebuyers

1. Springfield, IL
2. Peoria, IL
3. Montgomery, AL
4. Detroit
5. Flint, MI

Least Affordable Cities for First-Time Homebuyers

1. Los Angeles
2. Glendale, CA
3. Berkeley, CA
4. Santa Monica, CA
5. Santa Barbara, CA

"Take advantage of the equity that can build in homeownership and to protect against market instability that could impact the home's value, the closer you can get to 20% is best," said Brad Segal, Lecturer at University of Colorado Denver and President, Progressive Urban Management Associates. "This is a high bar for many/most first-time homebuyers, so 10% may be more realistic and can serve as a minimum."

To read the full report, including more data, charts, and methodology, click here.