It's a tough row to hoe for first-time homebuyers these days. In addition to the fact that choices are limited because of inadequate supply, asking prices continue to climb, with the median now just shy of $229,000, according to the National Association of Realtors.
But certain markets are more difficult to enter than others. And as a recent survey indicates, California is hands down the hardest.
Financial website Bankrate.com ranks the Golden State as the most complicated housing market for aspiring buyers who have never owned before, due to a combination of factors. Chief among them is what single-family dwellings are going for. According to the National Association of Realtors, a house in San Jose costs a median of $1 million, making it the most expensive metro area for would-be buyers. Three other California cities are also in NAR's top five list for priciest places to own, including nearby San Francisco, Anaheim and San Diego.
Six-figure salary needed to afford California home
Part of the affordability issue stems from what first-time homebuyers are earning. Generally speaking, they tend to be young. Because of their lack of experience, salaries may not be as high as people who've been in the labor force for awhile. According to the California Association of Realtors, those who seek to purchase a median-valued residence in California – which currently stands at $511,360 – would need to be pulling in an annual salary of $100,800. And even then, other preconditions have to be satisfied to be approved for a mortgage.
California's dearth of listings is an issue unto itself. For instance, through January, the Golden State had a supply level total of 3.7 months, CAR reported. This means that if no other properties were to go up for sale, it would take a little more than three-and-a-half months for inventory to be exhausted. Last year during the corresponding month, supply was 4.3 months.
Claes Bell, Bankrate.com analyst, noted how these realities are frustrating for young couples who are looking to settle down.
"Tight market conditions and unaffordably high prices really plague what many young Americans feel are the most desirable places to put down roots," Bell explained. "On the other hand, the availability of [Federal Housing Administration] loans that allow down payments of as little as 3.5 percent may make it easier to buy a home in high-priced markets than you think."
Indeed, NAR recently released a survey that examined how many first-time buyers have preconceived notions about the purchasing a new home that are inaccurate. For example, the poll found that over 85 percent of respondents were under the impression that a down payment of at least 10 percent was required. In reality, the median down payment for the last three years has been 6 percent for first-timers.
Less expensive listings located in Iowa
Meanwhile, most parts of the country have price points that are more reasonable. According to Bankrate.com's findings, Iowa is the most affordable place to own a home. In January, the latest month for which data is available, the median sales price in the Hawkeye State was $145,000, according to the Iowa Association of Realtors. That's up slightly from what the median was at that time last year, at $135,000.
Supply levels have also strengthened in Iowa. New listings rose 3 percent in January on a year-over-year basis, giving shoppers more options to select from.
Other states favorable to buyers include Utah, Minnesota, Kansas and Missouri, according to Bankrate.com's calculations.
For more information about this article, call 866-614-5959.