5 Best and Most Affordable Cities for First-Time Homebuyers: Zillow

US-ECONOMY-REAL-ESTATE-INDICATOR-RATE — (Photo : Photo by ANDREW CABALLERO-REYNOLDS/AFP via Getty Images) A new home is built at a housing development in Fairfax, Virginia, on August 22, 2023. Sales of homes in the United States ticked down in July, according to industry data released on August 22, 2023, as elevated mortgage rates and limited housing supply held buyers back. The housing market in the world's biggest economy has been reeling as interest rates climbed, making home owners reluctant to put their properties up for sale -- having earlier locked in lower rates on their mortgages.

Buying a home has now become increasingly more difficult, especially with soaring mortgage rates pricing out first-time homebuyers.

As of February, first-time buyers would need to earn at least $113,520 in annual income to afford a median-priced starter home worth $412,778. That meant hopeful home buyers would need to earn 35% more than the $84,000 median household income in the U.S.

However, there are a number of markets in the United States that are easier for first-time homebuyers to break into, according to Zillow. The online real estate marketplace ranked the cities based on rent affordability, the share of listings that a typical household can afford, expected competition for affordable homes, and the number of similar-age families living in the area.

Best City For First-Time Homebuyers

Ranking first on Zillow's list is the housing market in St. Louis, where the average American household only spends 20% of their income on housing costs.

While the definition varies, Zillow defines a home as comfortably affordable when households spend less than 30% of their income on monthly mortgage or rental payments.

Homes in St. Louis boast a median price of $205,500, per Redfin. While it is not the cheapest in terms of median listing prices, it has the highest share of home listings that a median-income family can comfortably afford (67%).

Additionally, St. Louis' housing market has less competition, with 3.4 affordable listings for every 100 renters.

"Our average home price is under $300,000. We have very good schools. We have lots of things to do that are free," Sandy Hancock, a St, Louis brokerage owner, told Yahoo Finance in response to Zillow's ranking. "It's wonderful."