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So you’re a millennial and you want to get serious about adulting. Owning a home sure would be a major milestone.
No more paying rent. You’d be building equity. Besides being a good investment, your home would be a castle to call your own. Keep whatever pets you want, paint whatever rooms you like, etc.
But buying a home is a big deal. Can you swing it? It turns out that the state you live in makes a big difference.
A new report from Bankrate identifies the best and worst states for first-time homebuyers. The upshot: Millennials “may have to stick to smaller, interior states to find a hospitable home buying climate.”
Naturally, that’s less than convenient for a lot of millennials. Among the 10 toughest states for first-time homebuyers are those with cities that happen to be magnets for young professionals — places like California, New York, Texas, Colorado, Oregon and Massachusetts.
Not surprisingly, housing in those hot spots is super-expensive.
“The best-performing states in our ranking are mostly Western and Midwestern states with varying degrees of urbanization,” Bankrate says.
The top three: Iowa, Utah and Minnesota.
Iowa: A totally awesome place to buy your first house.
While you meditate on that, let’s take a deeper look at the numbers.
You might be surprised where your own state ranks.
(I know what you’re wondering: OK, where does my state rank? The ranking of all 50 states is here.)
The bottom five: California, Hawaii, New York, Louisiana and Mississippi.
Yes, Louisiana and Mississippi are ranked among the worst states for first-time homebuyers. That’s because they rank low in credit availability. Banks reject a high percentage of mortgage applications there, which is a roadblock for millennials who have relatively thin credit files.
That and a poor job market for young adults explain why other Southern states like South Carolina, Georgia and Alabama placed in the bottom half of the rankings, too.
Places like Hawaii and California landed in the bottom five because of their astronomical house prices. Conversely, the easy availability of affordable homes is why other states rose to the top.
The top five: Iowa, Utah, Minnesota, Kansas and Missouri. They’re immediately followed by both Dakotas and Wyoming.
“What we found was stunning: Principal and interest payments in the least affordable states consumed more than a third of household income, versus just 13 percent in the most affordable states,” Bankrate says.
Today’s real estate market is tougher than ever for first-time homebuyers, according to a CNN report on Bankrate’s analysis.
Rising housing prices are making it harder for newbie homebuyers to sock away enough cash to make that crucial down payment. That puts them at a disadvantage when they’re competing with current homeowners with built-up equity.
Don’t get depressed. You don’t have to start looking for a nice fixer-upper in Des Moines if you don’t want to. Hold off on calling that real estate agent in Cedar Rapids.
The Bankrate and CNN reports offer the following tips for first-time homebuyers:
Happy house hunting.
Your Turn: Are you thinking about buying a house? What’s the most intimidating part of the process for you?
Mike Brassfield, a senior writer at Codetic, is a staunch proponent of home ownership. He can be reached at [email protected].