Top Places for First-time Homebuyers in Tennessee

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Top Places for First-Time Homebuyers in Tennessee

Real estate prices in Tennessee are on the upswing. While that’s good news for homeowners, it’s not so great for first-time homebuyers.

Housing data from Realtor.com show that median listing prices increased in every metropolitan area in the state in July, compared with a year ago. Larger metro areas such as Chattanooga, Nashville and Knoxville have seen double-digit price increases in that time.  

Overall, real estate prices in Tennessee’s metro areas in the past year have increased 8.3%, which outpaced the state’s 4% growth in income.  First-time homebuyers — who on average earn 28% less than repeat homebuyers, according to the National Association of Realtors  — could especially feel the pain in their pocketbook from rising prices.

To help first-time homebuyers, NerdWallet analyzed how much they could spend on a mortgage and down payment, as well as data on home appreciation, to find the best places to buy a house in Tennessee.

» MORE: Best programs for first-time homebuyers

How much can first-time homebuyers afford?

For our calculations, we assumed the median age of first-time homebuyers is 34, based on 2009 data from the American Housing Survey. Then, we looked at the median household income in Tennessee for residents ages 25-44 as the likely income range for first-time homebuyers.

We assumed a personal savings rate of 4.8%, based on the U.S. 10-year average as measured by the Federal Reserve Bank of St. Louis, and estimated how many years it would take for a typical first-time homebuyer in Tennessee to make a 20% down payment.

By using the Consumer Financial Protection Bureau’s recommendation that homeowners shouldn’t allocate more than 28% of their monthly income to housing costs, we determined that a first-time homebuyer in Tennessee could afford to spend $1,132 a month.

Top places for first-time homebuyers in Tennessee

1. McKenzie

McKenzie, one of the smartest investments for first-time homebuyers, is also one of the more rural. The city of just 5,500 is 46 miles from Jackson, the nearest large city. McKenzie’s top ranking on our list is largely due to a 15.7% growth in home values from 2010 to 2013, and a median home price that remains well below the statewide median. The city is home to Bethel University, as well as the Tennessee College of Applied Technology at McKenzie.

2. South Cleveland

South Cleveland, a census-designated place in Bradley County, is home to about 6,000 residents. The community received a “safe” rating, according to data from NeighborhoodScout, and it has the lowest rate of family poverty in our top 10. One benefit of South Cleveland is that residents can live next to the larger city of Cleveland without having to pay its higher median home price, which in 2013 was $153,000. South Cleveland’s median home price was $120,700, a 22.4% increase from 2010 to 2013.

3. Loudon

Loudon offers residents the comforts of a small city with proximity to a big city. It’s a half-hour drive from Knoxville and has a score of “most safe,” from NeighborhoodScout. Loudon’s median home price of $118,800 is comparable to Knoxville, where the safety-risk score is “least safe.”  For those seeking the great outdoors, Loudon is an hour’s drive from the Great Smoky Mountains National Park, where visitors can choose from activities including camping, biking and swimming.  

4. Sparta

Sparta, which almost became the state capital, is known for the historic Rock House, a nearby stopping point on the road between Knoxville and Nashville that was frequented by former presidents Andrew Jackson and James K. Polk. Sparta is also known for its manufacturing industry and abundance of nearby creeks and waterfalls. The diversity of attractions has helped Sparta’s home value appreciate 23.1%.

5. Dayton

Dayton’s home values grew 15.6% from 2010 to 2013, yet the city’s median home value of $123,800 is still below the median for the cities we examined. Dayton is near Chickamauga Lake and it’s a 40-minute drive to Chattanooga, Tennessee’s fourth-largest city. Dayton has a population of over 7,000 and has a crime-risk score of “safe.”    

6. Martin

Martin is a growing community of 11,400, just 15 miles east of Union City. Historically an agricultural city, Martin has seen big gains in its home values, with a 20.6% jump from 2010 to 2013. Home of the University of Tennessee at Martin, the city features a variety of activities, including the annual Soybean Festival. Martin has a crime-risk score of “safe.”

7. Collegedale

The population of this Chattanooga suburb from 2010 to 2013 grew 11.7%, the fastest rate in the top 10 places. Collegedale, which is home to Southern Adventist University, also saw the second-biggest increase in home values — 34%. While that increase makes Collegedale a smart investment for homeowners, the gain also can make it tough on homebuyers. The city’s median home value of $179,900 made it the most expensive place in our top 10.

8. Kingsport

Kingsport is a city of about 52,000 that sits at the northern Tennessee border. A half-hour drive from Johnson City and an hour from Cherokee National Forest, Kingsport offers both job accessibility as well as outdoor recreation. Kingsport has also made a commitment to sustainability: It is the winner of the 2008 Siemens Sustainable Communities Award and Walk Magazine’s Most Walkable Community Award.

9. Rockwood

With a median home price of $86,100, one of the lowest in the top 10, the average first-time homebuyer in Tennessee needs almost nine years to save for a down payment. Monthly housing costs are below the recommended $1,132. The downsides in Rockwood include a high poverty rate for families, and a “least safe” crime-risk ranking.

10. LaFollette

Located near the Cumberland Mountains, the small community of LaFollete recorded a 37.4% increase in home values from 2010 to 2013 — the largest on the top 10 list. Despite the gain, home prices are still affordable at $85,900, and monthly owner costs are roughly $280 less than the recommended average. It’s worth noting, however, that this affordable city is another with the lowest crime-risk rating of “least safe.”

Top places for first-time homebuyers in Tennessee

 

Rank Place 2013 population 2010-2013 population growth 2013 home price 2010-2013 housing
appreciation
Median property tax rate Monthly owner costs Years to save for 20% down Crime risk score
1 McKenzie 5,483 4.36% $84,700 15.71% 0.81% $814 8.52 Less safe
2 South Cleveland 6,008 -5.07% $120,700 22.41% 0.51% $895 12.14 Safe
3 Loudon 5,517 4.63% $118,800 6.36% 0.54% $972 11.95 Most safe
4 Sparta 5,009 2.41% $104,400 23.11% 0.54% $948 10.50 Least safe
5 Dayton 7,283 2.32% $123,800 15.59% 0.51% $1,017 12.45 Safe
6 Martin 11,372 2.61% $121,900 20.57% 0.60% $1,116 12.26 Safe
7 Collegedale 8,863 11.67% $179,900 33.95% 0.94% $1,302 18.09 Most safe
8 Kingsport 51,876 8.41% $134,800 17.12% 0.86% $1,071 13.56 Less safe
9 Rockwood 5,526 -1.18% $86,100 12.11% 0.62% $856 8.66 Least safe
10 LaFollette 7,377 -2.74% $85,900 37.44% 0.70% $852 8.64 Least safe
11 Athens 13,580 0.66% $124,100 24.22% 0.61% $1,035 12.48 Least safe
12 McMinnville 13,609 1.01% $93,200 13.11% 0.79% $913 9.37 Less safe
13 Oakland 6,752 16.11% $167,600 1.45% 0.45% $1,361 16.85 Most safe
14 Bloomingdale 10,188 4.58% $90,400 5.73% 0.56% $825 9.09 Safe
15 Lenoir City 8,758 4.76% $120,000 11.21% 0.48% $1,089 12.07 Less safe
16 Jonesborough 5,089 4.39% $153,000 10.07% 0.83% $1,079 15.39 Most safe
17 Millersville 6,261 2.45% $155,900 10.72% 0.80% $1,300 15.68 Most safe
18 Mount Carmel 5,425 1.42% $128,400 3.97% 0.77% $968 12.91 Most safe
19 Seymour 11,005 6.04% $150,800 1.21% 0.40% $1,090 15.17 Most safe
20 Morristown 29,107 1.25% $110,700 10.37% 0.69% $965 11.13 Less safe
21 Crossville 11,010 3.62% $138,700 8.36% 0.44% $1,015 13.95 Least safe
22 Cookeville 30,759 3.49% $158,600 16.96% 0.76% $1,179 15.95 Less safe
23 Sweetwater 5,839 0.55% $105,100 5.63% 0.56% $941 10.57 Less safe
24 Shelbyville 20,489 3.64% $96,200 9.69% 0.91% $1,027 9.67 Safe
25 Clarksville 137,145 8.72% $135,600 9.35% 0.93% $1,169 13.64 Safe
26 Lewisburg 11,192 2.18% $93,000 6.16% 0.94% $923 9.35 Safe
27 Middle Valley 13,431 4.50% $158,200 7.62% 0.77% $1,249 15.91 Safe
28 Savannah 7,017 0.09% $91,000 5.32% 0.65% $948 9.15 Least safe
29 Portland 11,658 6.24% $128,400 4.90% 0.79% $1,130 12.91 Safe
30 Mount Juliet 25,775 17.58% $198,400 4.42% 0.64% $1,473 19.95 Most safe
31 Paris 10,171 0.87% $79,400 4.47% 0.75% $854 7.98 Least safe
32 Dyersburg 17,086 -0.74% $96,400 11.57% 1.01% $1,086 9.69 Least safe
33 Jefferson City 8,155 0.73% $116,200 3.11% 0.60% $1,012 11.69 Less safe
34 Fairview 7,890 5.20% $167,500 1.64% 0.69% $1,362 16.84 Most safe
35 Dickson 14,761 3.23% $130,900 6.68% 0.77% $1,118 13.16 Less safe
36 Gallatin 31,079 6.86% $159,000 3.38% 0.75% $1,242 15.99 Safe
37 Kingston 5,907 0.73% $143,300 2.65% 0.77% $1,171 14.41 Safe
38 Springfield 16,537 2.73% $129,300 6.95% 0.83% $1,117 13.00 Less safe
39 Atoka 8,567 12.30% $171,800 -0.06% 0.78% $1,462 17.28 Most safe
40 Church Hill 6,746 1.75% $127,800 0.87% 0.85% $1,074 12.85 Safe
41 Lexington 7,751 1.44% $118,100 3.42% 0.62% $1,063 11.88 Least safe
42 Elizabethton 14,318 0.08% $108,500 5.03% 0.83% $949 10.91 Less safe
43 Spring Hill 30,148 18.62% $195,400 -2.20% 0.68% $1,520 19.65 Most safe
44 Greenbrier 6,505 5.00% $145,400 2.18% 0.86% $1,310 14.62 Most safe
45 Union City 10,856 -0.37% $91,600 3.39% 0.83% $916 9.21 Least safe
46 Tellico Village 5,956 9.67% $360,600 1.15% 0.48% $1,722 36.26 Most safe
47 Bristol 26,681 0.96% $103,500 4.55% 0.99% $1,011 10.41 Less safe
48 Harriman 6,348 -2.38% $85,400 4.91% 0.83% $1,039 8.59 Least safe
49 Soddy-Daisy 12,930 4.33% $129,700 0.46% 0.78% $1,120 13.04 Safe
50 Oak Ridge 29,340 1.43% $148,400 8.88% 0.97% $1,302 14.92 Less safe
51 Alcoa 8,519 0.54% $119,800 2.74% 0.77% $1,035 12.05 Less safe
52 Milan 7,836 0.51% $92,400 0.76% 0.87% $927 9.29 Safe
53 Johnson City 63,831 3.36% $152,500 4.60% 0.81% $1,167 15.34 Less safe
54 Henderson 6,366 3.66% $105,600 -3.12% 0.79% $954 10.62 Safe
55 Sevierville 15,259 5.40% $167,200 1.09% 0.46% $1,201 16.81 Least safe
56 Clinton 9,866 1.25% $128,100 1.10% 0.73% $1,135 12.88 Safe
57 Humboldt 8,436 -1.70% $76,000 0.13% 0.88% $864 7.64 Less safe
58 Manchester 10,167 2.71% $106,900 5.22% 1.10% $1,027 10.75 Least safe
59 Jackson 66,665 3.49% $115,100 4.64% 0.94% $1,206 11.57 Least safe
60 Knoxville 180,830 1.47% $117,000 4.93% 1.02% $1,085 11.77 Least safe
61 White House 10,462 7.15% $173,800 0.35% 0.80% $1,377 17.48 Safe
62 Cleveland 41,898 3.43% $153,300 4.93% 0.76% $1,176 15.42 Least safe
63 Brownsville 10,165 -2.18% $92,100 3.48% 0.96% $1,031 9.26 Less safe
64 Millington 10,969 5.97% $132,900 7.09% 1.14% $1,335 13.37 Less safe
65 Nolensville 5,980 11.75% $285,900 0.21% 0.57% $1,875 28.75 Most safe
66 Pigeon Forge 5,933 1.75% $169,400 2.54% 0.28% $1,409 17.04 Least safe
67 Signal Mountain 8,188 9.45% $283,700 3.54% 0.91% $1,793 28.53 Most safe
68 Maryville 27,653 2.70% $187,300 5.64% 0.92% $1,295 18.84 Safe
69 Bolivar 5,364 -3.37% $86,400 1.41% 0.83% $990 8.69 Less safe
70 Green Hill 6,337 -7.30% $181,300 2.49% 0.64% $1,353 18.23 Most safe
71 Chattanooga 170,246 3.50% $138,100 5.74% 1.05% $1,164 13.89 Least safe
72 Munford 5,972 3.34% $136,400 -0.87% 0.82% $1,233 13.72 Safe
73 Murfreesboro 111,814 8.98% $176,500 4.44% 0.94% $1,424 17.75 Less safe
74 La Vergne 33,127 9.09% $132,200 -3.85% 0.87% $1,187 13.29 Safe
75 Hendersonville 52,373 5.33% $199,500 1.73% 0.73% $1,611 20.06 Most safe
76 Brentwood 38,174 8.05% $487,100 1.21% 0.59% $2,630 48.98 Most safe
77 Erwin 6,081 -0.15% $102,900 -10.52% 0.71% $843 10.35 Most safe
78 Lebanon 27,144 7.77% $167,600 0.06% 0.75% $1,283 16.85 Less safe
79 Farragut 20,913 3.77% $317,100 4.72% 0.58% $1,933 31.89 Most safe
80 Columbia 34,987 1.46% $115,000 -0.69% 0.80% $1,077 11.56 Less safe
81 Newport 6,940 -1.18% $89,400 1.82% 0.86% $979 8.99 Least safe
82 Harrison 7,828 -1.12% $137,600 -4.18% 0.77% $1,196 13.84 Most safe
83 Tullahoma 18,799 1.28% $122,200 0.49% 0.98% $1,145 12.29 Safe
84 Smyrna 41,067 7.78% $150,000 -3.16% 0.83% $1,285 15.08 Safe
85 Red Bank 11,729 0.58% $122,700 2.42% 0.98% $1,114 12.34 Less safe
86 East Ridge 21,139 1.74% $116,900 -1.43% 0.95% $1,013 11.76 Least safe
87 Pulaski 7,776 -1.51% $91,000 -1.41% 0.82% $963 9.15 Less safe
88 Lawrenceburg 10,441 0.17% $87,700 -3.09% 0.90% $919 8.82 Least safe
89 Lakeland 12,426 8.02% $226,200 5.85% 1.03% $1,790 22.75 Safe
90 Greeneville 15,075 -0.75% $118,500 -2.31% 0.72% $1,026 11.92 Less safe
91 Arlington 11,459 15.46% $220,800 -2.13% 1.28% $1,918 22.20 Most safe
92 Fayetteville 6,950 1.58% $94,200 -3.19% 0.85% $1,088 9.47 Least safe
93 Winchester 8,512 0.97% $100,500 -12.53% 0.77% $948 10.11 Safe
94 Franklin 64,833 8.23% $307,800 -0.48% 0.68% $1,921 30.95 Most safe
95 Bartlett 56,923 7.90% $174,100 0.93% 1.38% $1,628 17.51 Safe
96 Ripley 8,414 0.50% $86,500 -0.35% 1.14% $1,054 8.70 Least safe
97 Goodlettsville 16,206 4.91% $179,500 2.28% 0.85% $1,586 18.05 Least safe
98 Collierville 45,678 8.80% $278,100 0.04% 1.27% $2,208 27.97 Most safe
99 Memphis 650,932 -0.60% $95,900 -2.44% 1.79% $1,214 9.64 Least Safe
100 Covington 9,054 0.42% $99,500 -7.10% 0.98% $1,061 10.01 Least safe
101 Germantown 39,091 1.13% $281,300 -1.09% 1.33% $2,139 28.29 Most safe

 

Methodology

We evaluated cities and census-designated places in Tennessee with populations of 5,000 or more; we excluded Fairfield Glade, a resort and retirement community. All housing and demographic data are from the U.S. Census Bureau’s American Community Survey. Our rankings are based on these factors:

Value appreciation is 40% of the score. To determine value appreciation, we looked at the median growth rate for population and home value from 2010 to 2013. Within this total, home value appreciation is 70% and population growth is 30% of the score.

Housing cost is 40% of the score. To determine housing cost, we averaged the median property tax rate, how long it would take a first-time homebuyer to save 20% of the median home price and the difference in selected monthly ownership costs of each location and the recommended $1,132 in Tennessee. Based on the assumption that Americans on average buy their first home at age 34, we looked at the 25- to 44-year-old group’s income, which in Tennessee was $48,535 in 2013. The personal savings rate is from the U.S. 10-year average, as published by the Federal Reserve Bank of St. Louis.

Prosperity and safety are 20% of the score. To determine prosperity, we looked at the percentage of families living in poverty in each city. For safety, a crime risk index for Tennessee was provided by NeighborhoodScout. We grouped the index, with scores from 0 to 100, into categories of “most safe,” “safe,” “less safe” and “least safe.” To find out more about how the crime score is calculated, go to NeighborhoodScout.com.


Great Smoky Mountains National Park, Tennessee, image via iStock.