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CNN —  

You’ve been searching and saving for months – or maybe even years. Will 2020 finally be the year you buy your first home?

The conditions seem right: Interest rates are much lower than the 5% to 5.5% rates forecasters anticipated last year, and the economy is still going strong. But you’re not the only one wanting to buy and there aren’t a lot of homes to choose from.

In fact, the supply of available entry level homes is approaching historic lows, according to Realtor.com.

Annual median real estate prices are expected to continue to climb by 3.6%, according to a group of economists surveyed by the National Association of Realtors.

“There will be a lack of inventory at that entry level price point and home prices are still going to go up,” said Lisa Sturtevant, chief economist for the Virginia Association of Realtors.

She said those factors are not likely to change soon.

A good year for Millennials to buy

Heading into 2020, Sturtevant said that demographics point to this being a good year for Millennials, who are mostly now in their 30s, to buy.

“For a while, everyone was saying Millennials don’t want to buy homes. But they say they do,” she said. “They have been about five years behind with the things that come along with home ownership, like marriage and having kids. Jobs are good and there is some economic certainty that makes it feel like 2020 will be a good year for them to buy.”

But the small inventory of lower cost homes continues to bedevil buyers in many markets across the country.

The National Association of Homebuilders said new construction, which is poised to ramp up in the coming year, should help. While most of those homes won’t be for first-time buyers the new construction will provide a move-up opportunity for families who want to upgrade from their own home.

Quest for affordability will push open midsize markets

While you may be able to buy a house next year, it may not be where you planned to live.

Major metropolitan areas like New York and Seattle are among some of the most expensive places in the country to buy. And much of California, where the median home price is $600,000, has become unaffordable for first-time buyers, says Leslie Appleton-Young, chief economist at the California Association of Realtors.

“For the Bay Area, people who are priced out are going to Solano County or Sacramento,” said Appleton-Young. “The people who are priced out of Sacramento and the Inland Empire, they are going out of state, to places like Arizona, Nevada and places that are more affordable. We’re looking at the tipping point.”

A few cities are affordable now and poised to be the cities where you wish you would have bought in 2020, come 2030. “Some cities are clearly positioned for exceptional longer term performance,” said Lawrence Yun, chief economist for the National Association of Realtors.

The NAR identified 10 cities that are expected to outperform, based on criteria that included housing affordability for new residents, consistent job growth, the age of the population and home price appreciation.

These cities are: Charleston, South Carolina; Charlotte, North Carolina; Colorado Springs, Colorado; Columbus, Ohio; Dallas-Fort Worth, Texas; Fort Collins, Colorado; Las Vegas; Ogden, Utah; Raleigh-Durham-Chapel Hill, North Carolina; Tampa-St. Petersburg, Florida.

Buy or continue to rent?

Even as home prices have gone up in many markets, the alternative, continuing to rent, isn’t cheap either.

“Ask yourself how long you expect to live in the home,” said Jay Abolofia a certified financial planner and founder of Lyon Financial Planning. “If it’s less than five years, consider renting instead, especially if prices are high and the market is volatile.”

Avoid thinking of a first home as an investment, he said. “No one can predict the market,” he said. “It’s best to consider home ownership as an expense rather than an investment.”

Don’t underestimate the long-term costs associated with homeownership either, he said. “Add an additional 2% of the dwelling’s replacement cost to your estimate of annual operating expenses to account for major maintenance.”

While interest rates are appealing, in 2020 it is important to understand that prices remain high in most major metro areas, he said. “This requires a larger down payment and higher annual property taxes, which are no longer deductible over $10,000.”

To get over the down-payment hurdle, some people consider putting down less than 20%, but Aboldofia says that is also risky.

“The greater the size of the mortgage, the larger the interest payments, even if home prices fall,” he said.

Still, renting remains a good option, even in some high-cost areas, says Abolofia. “Compare the home sales price to the annual rental expense for an equivalent property. If buying costs more than 15 to 20 times that of renting, you’re better off renting.”