NEW YORK (CNNMoney) — It’s not easy being a first-time homebuyer these days.
Around the country, home prices have been rising, inventory is limited, and banks have tightened lending standards.
But California is the toughest state of all for first-time homebuyers, according to a new report from Bankrate.com.
Buyers in the Golden State face low affordability, tight inventory and high unemployment among workers ages 25-34.
“Millennials have been squeezed financially in a number of different ways,” said Claes Bell, an analyst at Bankrate.
Rising home prices make it difficult for buyers to save for a down payment, which can put first-timers at a disadvantage when competing against current owners who have built up equity.
“First-time buyers might not have the ability to go up in price to compete, they are saving their first down payment in cash,” said Bell.
Rounding out the top five worst states for first-time buyers are Hawaii, New York, Louisiana and Mississippi.
The study evaluated the housing markets in all 50 states taking into consideration affordability, inventory levels, lending environment, home ownership among 35-year-olds and the job market.
Housing affordability is particularly tough in Hawaii, where the percentage of owner-occupied housing headed by someone under 35 was just 20% — the lowest in the nation.
“The young just don’t own homes in Hawaii,” noted Bell.
Lack of inventory has been plaguing housing markets across the country recently, and is particularly tight in homes at the lower-end of the market — where many Millennials tend to be looking.
“The inventory of starter homes is really small,” said Bell. “Those homes were absorbed by investors during the aftermath of the housing crisis.”
But not all buyers are facing an uphill battle to put some roots down.
Iowa is the easiest state in the country for first-time buyers, according to the report, thanks to its affordable home prices and strong job market for Millennials.
“Young people are able to buy there,” said Bell. “It has a relatively strong job market with relatively low unemployment and strong credit availability.”
Millennials looking to buy their first home might also consider settling down in Utah, Minnesota, Kansas and Missouri, which followed Iowa as the easiest states for first-time buyers.
“First-time buyers should cast a wide net when looking,” suggested Bell.
“They may want to consider buying a little smaller or farther away from their job than they would have liked. Then, once you build up equity, it can become easier to build up a down payment for a home you like.”