NEW YORK (MainStreet) — Low mortgage rates and an improving job picture will prompt many renters to switch to homeownership in 2015, and here are three cities that market watcher Zillow.com sees as this year's best choices for first-time homebuyers.
"If your goal is to slow down, buy a home and stay there for a while, these are metro areas where places are still affordable," says Zillow economist Skylar Olsen, who compiled the firm's picks.
Zillow analyzed America's 50 most-populous metro areas to see which offer first-time buyers the best combination of affordability, a good supply of entry-level homes and rising median incomes.
Olsen says the winning cities are places where property prices either didn't go crazy during the recent housing boom, or did do so but later collapsed and haven't completely recovered.Read More: 5 U.S. Markets That Are Already Back in Housing Bubbles
Of course, that means San Francisco and other cities with booming economies but soaring home prices didn't make the cut.
Olsen says those markets attract lots of young workers who'd love to buy their first homes, but can rarely afford to do so."If you ask Millennials which metros they feel confident they can become homeowners in, it's not San Francisco or New York," she says.
Read on to check out cities that Zillow believes offer 2015's first-time homebuyers the best market fundamentals.
The firm selected winners by looking primarily at how much median money households headed by a 23- to 34-year-old earn in each city and what share of gross monthly income young locals need to pay for entry-level homes. (The study defined "entry level" as properties priced in the bottom third of each metro area's October 2014 Zillow listings.)
Monthly payment figures assume buyers purchase places using 5% down payments, private mortgage insurance and 30-year fixed-rate mortgages at prevailing interest rates. All household-income numbers are as of 2014's third quarter and refer to families headed by 23- to 34-year-olds, while Zillow omitted metro areas that didn't have at least 5% annual increases in the number of available entry-level homes.