Top 10 ‘Starter Home’ Housing Markets for First-Time Buyers in 2022

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  • Birmingham and Cleveland are among the best “starter home” markets.
  • On average, buying beats renting in these and other real estate markets.
  • The 10 metros below offer good deals for first-time buyers in 2022.

The real estate market has changed dramatically over the past couple of years, largely due to COVID-related migration patterns. Home-price growth has shifted the playing field, when it comes to renting versus buying a home. This is especially true for first-time buyers seeking a lower-priced “starter home.”

As of early 2022, some housing markets are more buyer-friendly, while others tend to favor renting a house over buying.

According to a recent report from Realtor.com®, buying a starter home is more affordable than renting in real estate markets like Birmingham, Cleveland, Pittsburgh, St. Louis and Detroit. In these and other U.S. cities, the monthly cost of buying an average-priced home is significantly lower than renting.

These are some of the best real estate markets for first-time buyers in 2022, particularly those with limited budgets.

Best ‘Starter Home’ Markets for First-Time Buyers

In 2022, housing markets like Baltimore, Birmingham, Cleveland and Detroit offer affordable housing options for first-time buyers seeking a starter home. These metro areas are relatively affordable in 2022, when compared to most other U.S. cities and metros.

In this context, a “starter home” is a smaller property with no more than two bedrooms. Due to their smaller sizes, these houses often fall below the median home value for their local real estate markets. First-time buyers, in particular, tend to favor starter homes.

The table below was adapted from the February 2022 Realtor.com report mentioned above. It shows the top-ten metro areas that favor buying a starter home versus renting one, as of January 2022.

Specifically, it shows the average cost of buying a starter home versus the rent cost for a similar-sized property. The column on the right shows the monthly savings for buyers compared to renters.

MetroBuy Cost per MonthMedian Rent$ Savings (Buy-vs-Rent)
Birmingham, Ala.$668 $1,201 $533 
Cleveland, Ohio$809 $1,325 $516 
Pittsburgh, Penn.$945 $1,530 $585 
St. Louis, Mo.$812 $1,295 $483 
Detroit, Mich.$901 $1,350 $449 
Baltimore, Md.$1,242 $1,773 $531 
Virginia Beach, Va.$1,091 $1,500 $409 
Orlando, Fla.$1,327 $1,820 $493 
Tampa, Fla.$1,543 $2,070 $527 
Louisville, Ky.$916 $1,200 $284 

To quote the Realtor.com report: “In January, the monthly cost of buying a starter home was more affordable than renting a similar-sized unit in 26 of the 50 largest metros, led by secondary cities like Birmingham, Ala., Cleveland and Pittsburgh.”

Both rental and home-buying costs continue to rise in 2022. But in many U.S. cities, rents are expected to rise faster than home prices over the coming months. According to Realtor.com’s chief economist Danielle Hale, this could “tip the affordability scale in favor of first-time buying for many Americans” in 2022.

House Prices Still Rising in Most Housing Markets

In the vast majority of real estate markets across the U.S., home prices continue to climb at a steady pace. We might see some slowing or “moderation” in 2022, according to some forecasters. But the general consensus is that house values will keep rising for the foreseeable future — at least in most cities.

According to a January 2022 report from the economic research team at Fannie Mae:

“We still expect strong [home price] appreciation for this year as inventories currently remain very tight and measures of buyer traffic remain robust. Our expectation of 7.6 percent growth in 2022 is still considerably higher than the average pace of 5.4 from 2012 to 2019. However, this represents a large deceleration from 2021’s expected record house price growth of 17.3 percent.”

This ongoing rise of home values, along with a recent uptick in mortgage rates, could challenge some first-time buyers who are seeking a starter home in 2022.

Tight Inventory Conditions Remain a Factor in 2022

And then there’s the inventory situation to consider. In many housing markets, the supply of homes for sale is still well below the demand from buyers. Inventory levels are particularly low among lower-priced starters homes that are favored by first-time buyers.

Even in the more affordable housing markets for starter homes, like the ten metros listed above, inventory conditions continue to challenge buyers. With the exception of Pittsburgh, all ten metro areas shown in the above table had less than a 2-month supply of homes for sale last month.

Inventory levels were especially low in Boston, Orlando and Tampa, all of which had about a 1-month supply as of January 2022. That was well below the national average for that same month.

Those affordable housing markets might favor buying a starter home over renting in 2022. But even in those favorable markets, many buyers could struggle to find a house that meets their needs and falls within budget.

Part 2: Markets that favor renting over buying

Disclaimer: This report includes home price forecasts issued by third parties not associated with the publisher. Such predictions are the equivalent of an educated guess and should be treated as such. The Home Buying Institute makes no claims about future housing market conditions.