Average home prices and relatively elevated mortgage rates are the prominent factors in US homebuyers' affordability crisis. Despite this, first-time buyers still showed up in force to make up half of housing market purchases in 2023.

Zillow Chief Economist Skylar Olsen joins Market Domination Overtime to talk about the most affordable housing markets for prospective home purchasers, especially younger demographics in first-time buyers.

"The metric that's driving this is the share of the population that is between the ages of 29 and 43," Olsen tells Yahoo Finance, listing the top ten US metro areas for first-time home buyers. "In other words, there are a whole heck of a lot of millennials there experiencing this same life challenge. These were really thriving and popular markets over the course of the pandemic."

For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.

Editor's note: This article was written by Luke Carberry Mogan.

Video Transcript

JOSH LIPTON: Affording a home is no easy feat amid elevated prices and mortgage rates. Yet first time home buyers made up half of all home purchases last year according to Zillow. To break down the best places for those on the hunt, to join the list of first time homebuyers, let's get to Zillow Chief Economist Skylar Olsen.

Skylar, it is good to see you. So you've got a new report out. Best markets for first time buyers. Two questions, Skylar. One, how you defining best here, and two, what are those markets?

SKYLAR OLSEN: Yeah, absolutely. Well, I mean, as you mentioned, affordability is really a huge challenge out there. So three out of the four metrics in Zillow's index for first time homebuyers are going to capture that. The first one is how easy is it to save for the down payment. So we're actually going to look at rent affordability.

The third one-- or excuse me, second and third are going to capture the affordability of the listings that are actually available because we don't have a lot of inventory out there. And then also how competitive that inventory will be. Now, those three metrics are going to bring forward the Midwest is really King in this sense.

So here think Indianapolis, St. Louis, Detroit. But that's not all. You can move East. And you have options like Pittsburgh say, yeah, exactly here. Thank you so much. Or Baltimore.

Now, we want to balance affordability with livability. And that caused a few of the surprising metros that you see on this list. So rising to the top Austin and San Antonio. And the metric that's driving this is the share of the population that is between the ages of 29 and 43.

In other words, there are a whole heck of a lot of millennials. They're experiencing this same life challenge. These were really thriving and popular markets over the course of the pandemic.

JULIE HYMAN: Well, Skylar, it's always interesting to see these kinds of lists. However, if I'm buying my house for a first time, I probably am working in a particular place. And so in other words, I can't just say this is a great market to buy a house. I got to have a job there to move there.

So I'm just curious what utility-- I mean, it's great if you're already living there. You can pat yourself on the back, or you can start looking for a house. But if you don't, what do you do with this information?

SKYLAR OLSEN: Well, gosh, it's interesting that you bring this up. I mean, we actually see in census data that people actually move more when or rather move farther these days when things are unaffordable. Because you might need to move in order to access the lifestyle that you have in mind, particularly well rather it depends on where you live. Now, that said, you bring up a great point a lot of us kind of fund our lives through the support of our communities. Maybe it's the child care that your parents kind of offer you.

And that kind of financial support can be critical. For a lot of people becoming a buyer is going to happen further down the road because you're going to need to save up for that down payment, which is why we actually included rent affordability in this index for that reason. Down payments are still challenging because prices have not fallen despite high mortgage rates.

And I think the primary reason why we surface these kinds of lists, honestly, is to shake up people's curiosity about different opportunities across the country and get you to consider maybe different options. But that might mean across your metro, a smaller place, or one further out is generally what people consider when they're buying power drops in high mortgage rates.