These are the best cities for first-time homebuyers

Americans are finally moving out on their own again, and for the first time since the Great Recession, new owners are outpacing new renters in the housing market.

As millennials age into their mid-30s, they're leading what is expected to be a huge surge in first-time homebuyers, but location has never been more important.

Today's young buyers are more cash-strapped than previous generations, thanks to high levels of student debt and slow income growth over the last decade. Home prices, however, are rising fast, but faster in some places than others. New buyers today are more mobile, thanks to technology in the workforce, so choosing an entry market is key.

"As millennials reach the typical homebuying age, they are coming into a tough housing market with low inventory and lots of competition," said Zillow Chief Economist Svenja Gudell. "More challenging metros aren't out of reach for new buyers, but they should be prepared to face a more competitive buying environment."

Zillow looked at five metrics to determine which local housing markets would serve first-time buyers best: Median home values, value forecasts for equity growth, inventory, the number of listings with price cuts, and the breakeven financial time horizon for buying over renting.

Down payment is usually the biggest challenge for first-time buyers. Not only does it determine how much house you can buy, it also determines the mortgage rate. Rates are based on how much a buyer can put down. A 5 percent down payment in the expensive San Francisco Bay Area, for example, is larger than a 20 percent down payment in most of the best markets for first-time buyers. The bigger the down payment, the lower the monthly mortgage payment in most cases.

Seven in 10 top markets for first-timers have lower median home values than the national average, but entry price is not everything. First-time buyers worry most about competition and about making money on their investments.

Local markets like Cleveland and Detroit make the list due to low entry prices, but Orlando, Florida, and Atlanta have high inventory compared with the number of households, so less competition. Las Vegas has the most potential for price appreciation, given its growth in the economy and population.

Watch: Home value recovery uneven throughout US


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