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A new report from the National Association of Realtors suggests that mid-sized cities could be the ticket for millennials looking to purchase homes.
First-time homebuyers are being priced out of many big metropolitan areas, but mid-size cities offer affordable housing as well as jobs and amenities, according to the National Association of Realtors’ Realtor.com website. Bloomington, Illinois tops Realtor.com’s list of best markets for first-time homebuyers, with a median list price of $160,000, less than half of the national median price of $370,000.
The other cities that round out the top 10 on the list are Iowa City, Iowa; Kalamazoo, Michigan; Great Falls, Montana; Eau Claire, Wisconsin; Savannah, Georgia; Schenectady, New York; Taylorsville, Utah; Harrisonburg, Virginia; and Rapid City, South Dakota.
Bloomington, which has about 77,000 residents and is located near the center of Illinois, took the top spot for several reasons. Besides affordable housing, it is within a two-hour drive of Chicago, St. Louis and Indianapolis, has a robust jobs market and short commute times.
"Because it’s in the middle of the state of Illinois, it’s a great little spot," Becky Gerig, a real estate broker at Re/Max Choice in Bloomington, told Realtor.com. "For young people, there is a lot of opportunity for jobs."
First-time buyers are entering a highly competitive real estate market. Homes nationwide, especially in big cities and their surrounding suburbs, are selling in days with multiple offers. This housing frenzy is pricing many buyers, especially millennials, out of the market.
George Ratiu, senior economist at Realtor.com, noted in a statement that for younger, first-time buyers, affordability is a major issue. “That’s especially true for many millennials who moved to big cities to start and build their careers," he said. "Between student debt, slow-growing wages, and fast-growing home prices, when the pandemic hit they were still in these large cities but no closer to being able to afford a home."
Realtor.com studied nearly 800 cities with at least 50,000 residents. It looked at six factors:
+ Home prices compared with local incomes.
+ Percentage of 25 to 34 year olds.
+ Number of homes for sale.
+ Job opportunities.
+ Travel distances to workplaces.
The list was limited to one city per state.
The list’s top markets have more young people than other places. The average number of residents 25 to 34 years old was 14.3%, compared with the national average of 13.5%, Realtor.com said. Savannah had the highest share of young people (16.9%) and Harrisonburg the lowest (12.2%).
Job stability is important to homeownership, according to the report. The top markets had an average unemployment rate of 4.5% in December, lower than the national rate of 6.7%. Iowa City had the lowest unemployment rate—2.7%.
In addition, the top cities on the list had an average commute time of 20 minutes, less than the national rate of 29 minutes.
Other real estate surveys point to Americans moving away from big cities. More than 100 economists surveyed in August by Zillow, the national online real estate website, said they expected the pandemic to have a lasting impact on homebuyer preferences, including higher demand for living in the suburbs and in “secondary cities.”
Jean Dimeo is the managing editor of Route Fifty.