Personal Finance

The Worst Cities for New Homebuyers

House with a "For Sale" sign in yard

If you're looking to buy your first home, much will depend on factors such as your income, credit score, prevailing interest rates , and local home prices. Another key factor (and one that's often overlooked) is how easy or hard it is to find a new home in the town where you're house-hunting.

Here's a look at 10 cities in America where the number of people looking to buy a first home is at odds with the number of starter homes listed for sale. In such a scenario, there is likely to be tough competition and perhaps bidding wars for homes, making it hard to find good deals.

House with a "For Sale" sign in yard

Image source: Getty Images.

A recent report on "mismatched markets" by the folks at Trulia found "most shoppers searching for starter and trade-up homes but most listings being premium homes." It also listed the 10 cities where the mismatch was most pronounced:

Rank Metropolitan Market Percentage of Searches for Starter Homes Percentage of Listings for Starter Homes
1 Dallas, Texas 18.1% 6.2%
2 Houston, Texas 17% 5.7%
3 Charlotte, North Carolina 20.3% 11.3%
4 Raleigh, North Carolina 24% 10%
5 Fort Worth, Texas 19.5% 9.6%
6 Deltona-Daytona Beach-Ormond Beach, Florida 23.9% 14%
7 Greenville, South Carolina 20.5% 13.3%
8 Grand Rapids, Michigan 28.4% 20.4%
9 San Antonio, Texas 12.2% 5.8%
10 Tampa-St. Petersburg, Florida 28.9% 16.7%

Data source:

A mortgage application stamped "Approved"

Image source: Getty Images.

Homebuying tips

If you're looking for a new home in one of the markets above -- or any market, for that matter -- know that no matter how mismatched supply and demand may be, there are still some things you can do to improve your odds of success. Here are some tips:

  • Make sure your credit score is as high as it can reasonably be, because high scores get lower interest rates from lenders. You can get free copies of your credit reports once a year from each of the main credit reporting agencies -- do so and correct any errors on them. If your score is legitimately low, consider waiting a while before buying a home, so that you can boost your score. Some ways to improve your credit score include paying bills on time and paying off a lot of debt in order to lower your debt-to-available-credit ratio. Lenders like to see you owing only about 10% to 30% of the sum of all your credit limits, because it suggests that you have your debt under control and can afford to take on some more debt via the mortgage you're seeking.
  • Figure out just how much home you can afford . It can be tempting to go big, but doing so can leave you with little margin of safety, in case you or a spouse loses a job or your household faces some major unexpected expenses. Aim to be spending, say, no more than 25% of your income on your mortgage -- and if you can keep it to 20% or less, you'll free up more funds for retirement savings, college savings, or other needs.
  • Once you decide that you're ready to make an offer as soon as you see a home you want, get pre-approved for a mortgage. That can make you a more competitive buyer.

It can be daunting to house hunt in a mismatched market, but you're not doomed. The supply of starter homes may be low, but if you're a sensible and savvy shopper, you can be among the buyers who snag those homes.

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