15 Best States for First-Time Homebuyers

Published on February 5, 2024 at 4:46 am by Zarah Hamid in Business, Lists, News

In this article, we will be navigating through the current situation of housing in the US and some prominent national homebuilders, while covering the 15 best states for first-time homebuyers. If you wish to skip our detailed analysis, you can move directly to the 5 Best States for First-Time Homebuyers.

Is the US Housing Market Witnessing a Rebound in 2024?

2023 was a demotivating year for many homebuyers including those who wanted to purchase their first ever house. As soaring home prices raised affordability concerns for these first-time homebuyers, they postponed their decision to buy a house. Simultaneously, existing homeowners held on to their houses since they were to pay a higher interest on a new house. Mortgage rates remained high and reluctant. The existing inventory of houses was also not enough to cater to the rising consumer demand. However, the gloomy housing market is experiencing a positive change in 2024.

On February 1, Forbes reported that although house affordability problems are persistent, the drop in mortgage rates will enable numerous home shoppers to own a house in 2024. The majority of experts expect that the hike in the interest rates against inflation will finally be at rest. The market’s return to normal also depends on certain factors. These factors include how well will the inventory be restored since this can bring the home prices down. Cities where home prices are falling have been previously covered. Another condition is a rather steady drop in interest rates. This is because a sharp decrease can highly increase demand which will ruin the gains in inventory.

The current housing stock is still behind what is required. However, a positive development in this regard is that builders have begun to see improved conditions for future construction. During the month of January, the builder sentiment increased from 37 to 44. New single-family building permits have also experienced a rise.

On January 25, The New York Times reported that the inventory of existing houses has been even less. This has driven new construction of homes to fulfill the demand. The construction and purchase of new houses went up in the second half of 2023. As of now, new homes account for 30% of the overall housing market. This new home market is relatively bright and offers options, especially to those who wish to buy for the first time. Another issue pertaining to newly constructed houses is that they tend to be more expensive than existing houses. In order to address this problem and cater to the needs of buyers who are budget-conscious, homebuilders are shrinking room sizes and altering floor plans.

Leading US Home Construction Companies

The US housing market is still subject to the issues it has faced throughout 2023. It will take quite some time for the market to go back to the pre-pandemic levels of inventory as well as mortgage rates. While the housing market cools down, companies such as Lennar Corporation (NYSE:LEN), PulteGroup, Inc. (NYSE:PHM), and KB Home (NYSE:KBH) offer reasonable living options in desirable locations. Let’s take a look at what these home construction companies have been up to. You can also take a look at some of the largest homebuilders in the US.

Lennar Corporation (NYSE:LEN) is a leading US home builder that offers affordable houses for all generations. Lennar’s Multifamily segment also develops high-quality multifamily rental properties. On February 2, Lennar Corporation (NYSE:LEN) reported that the company has initiated selling at its new community in Palmetto, Florida. Amenities in this single-family home master-planned community include a fitness center, playground, a clubhouse, and pickleball courts. Pricing for the new homes starts in the mid $400,000s. The community offers a short commute to Tampa and St. Petersburg. Anna Maria Island and beaches in Florida can also be visited by the residents. The opening for four professionally designed model homes that are still under construction has been planned for the summer of 2024.

PulteGroup, Inc. (NYSE: PHM) builds communities that offer a good standard of living across the US. The company tends to be well-positioned to capture the increasing demand for buyers as the housing market returns to better conditions. On January 30, PulteGroup, Inc. (NYSE: PHM) reported strong financial results for the fourth quarter. The company reported earnings per share of $3.52, beating the EPS estimates by $0.29. The total revenue for the quarter amounted to $4.29 billion. An increase of 57% was recorded in net new orders. The homebuilder witnessed a substantial rise in buyer activity.

KB Home (NYSE: KBH) is another major home construction company in the US. Homebuyers can choose from multiple design options to get their houses personalized based on their preference and budget. On January 26, KB Home (NYSE: KBH) reported the grand opening of three new communities namely Lexington, Fairfax, and Hayworth in Elk Grove, California. Parks, playgrounds, sports courts, and an elementary school are some of the included amenities. While staying in these communities, homebuyers can easily travel to major employment centers in Sacramento and Sacramento International Airport. Elk Grove Aquatics Center, Emerald Lakes Golf Course, and Elk Grove Regional Park can also be conveniently accessed. Pricing for homes in the three communities starts from the mid $500,000s, low $600,000s, and mid $600,000s, respectively.

There are several other best homebuilder stocks to invest in. Now that we have taken a look at the current housing market in the United States, we can move to the 15 best states for first-time homebuyers.

15 Best States for First-Time Homebuyers

Our Methodology:

In order to compile a list of the 15 best states for first-time homebuyers, we sourced data from Zillow, a leading real-estate source. The most recent state-level data was available from December 2023. We selected the average home price as our metric. The rationale behind choosing this metric was that it represents the primary concern of first-time homebuyers regarding affordability. The 15 best states for first-time homebuyers have been ranked in descending order of their average home prices.

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15 Best States for First-Time Homebuyers

15. Nebraska

Average Home Price: $245,663

As recorded in December 2023, the average home price in Nebraska is $245,663. This price increased by 4.6% year-over-year. Zillow’s market overview shows that the for-sale inventory in the state is 4,376. Hence, Nebraska is a suitable living option for first-time homebuyers.

14. North Dakota

Average Home Price: $244,772

North Dakota is one of the US states deemed a good option for those who wish to buy their first house. The average home price in the state is $244,772. This price went down by 1.2% year-over-year. Zillow’s market overview shows that the for-sale inventory in the state is 2,156.

13. Missouri

Average Home Price: $234,836

As recorded in December 2023, the average home price in Missouri is $234,836. This price went up by 4.3% year-over-year. Zillow’s market overview shows that the for-sale inventory in the state is 18,244. Hence, Missouri is one of the best states for those buying a home for the first time.

12. Michigan

Average Home Price: $228,329

Michigan ranks among the other US states suitable for first-time homebuyers. As recorded in December 2023, the average home price in the state is $228,329. This price increased by 4.2% year-over-year. Zillow’s market overview shows that the for-sale inventory in the state is 26,721.

11. Indiana

Average Home Price: $227,178

First-time homebuyers can also seek to live in Indiana. As recorded in December 2023, the average home price in the state is $227,178. This price experienced a rise of 4.3% year-over-year. Zillow’s market overview shows that the for-sale inventory in the state is 17,958.

10. Alabama

Average Home Price: $216,564

Alabama is another good option for first-time homebuyers to settle in. As recorded in December 2023, the average home price in the state is $216,564. This price increased by 1.8% year-over-year. Zillow’s market overview shows that the for-sale inventory in the state is 17,477.

9. Ohio

Average Home Price: $213,149

As recorded in December 2023, the average home price in Ohio is $213,149. This price went up by 5.4% year-over-year. Zillow’s market overview shows that the for-sale inventory in the state is 24,746. Hence, Ohio is one of the best states for those buying a home for the first time.

8. Kansas

Average Home Price: $212,995

The 15 best states for first-time homebuyers include Kansas as well. As recorded in December 2023, the average home price in the state is $212,995. This price increased by 4.3% year-over-year. Zillow’s market overview shows that the for-sale inventory in the state is 6,743.

7. Iowa

Average Home Price: $205,375

Iowa is deemed a good place for first-time homebuyers. As recorded in December 2023, the average home price in the state is $205,375. This price went up by 3.1% year-over-year. Zillow’s market overview shows that the for-sale inventory in the state is 8,973.

6. Arkansas

Average Home Price: $196,406

Arkansas is one of the 15 best states for first-time homebuyers. As recorded in December 2023, the average home price in the state is $196,406. This price has risen by 2.5% year-over-year. Zillow’s market overview shows that the for-sale inventory in the state is 11,319.

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