Get ready for yet another housing milestone: For the first time, median home list prices have topped $300,000 in America. And with that comes a steady rise in mortgage prices—median home loans have grown 19.7%, to $229,000, over the past five years, according to a realtor.com® analysis of Optimal Blue mortgage data. But here’s the big problem: Wage growth hasn’t come close to following suit. In the most recent five-year span tracked by census, household incomes rose only 10%. And most of those gains were eaten up by inflation. Ouch!
Welcome, my friends, to America’s housing affordability crisis.
But while much of the country struggles to achieve the dream of homeownership, not everyone is taking out budget-busting loans. There are still markets in America where around half of borrowers are getting mortgages with payments under $1,000 a month or less on 30-year fixed-rate loans—and the realtor.com data team set out to find them.
Reality check: Buyers in these places will have to forgo metros with thriving economies and nightlife in favor of areas that aren’t nearly as well-off. Homes are cheaper in areas where there have been steep job losses, incomes are lower, and there are more sellers than buyers.
“Right now, the Rust Belt area and parts of the South are where home buyers will get the biggest bang for their buck,” says Todd Teta, chief product officer at ATTOM Data Solutions, a real estate data firm. “Stay away from the West Coast, where home prices aren’t showing too many signs of slowing down.”
Last year, the U.S. overall hit a 10-year low for housing affordability, according to ATTOM.
To come up with our rankings, we created a hypothetical 30-year fixed-rate loan for each of the 200 largest metropolitan areas.* These loans included 10% down payments, 4.55% mortgage interest rates, 0.5% of the value of the home in private mortgage insurance payments, and a $40 home insurance payment for each $100,000 in home value. Additionally, we factored in 1% of the home’s value going toward home maintenance annually, the industry standard.
We concluded that the price point to get a mortgage under a cool thousand is $162,000 or less. For perspective: The only real estate currently listed in San Francisco below that level is this $100,000 parking spot.
We excluded property taxes, which can vary greatly even in a single market. And our calculation doesn’t include the biggest nut of all: down payment. We’re focusing on the ongoing charges you’ll need to pony up each month.
Ready? Let’s take a clear-eyed look at the places where monthly homeownership costs are the lowest.
Where you can own a home for less than $1K a month
Median list price: $121,800** Share of homes with monthly mortgage of $1,000 or less: 63.7%
When the steel factories began closing decades ago, Rust Belt cities such as Pittsburgh and Youngstown were devastated. In recent years, Youngstown has made some forward progress with its business incubator helping to foster a tech startup scene. But for now, Youngstown is still one of the poorest cities in the nation, hence the very low home prices.
“You can get amazing deals in this area. It has a low cost of living, and while people might not be making huge wages, they can live comfortable and have a very affordable house payment,” says local real estate agent Tibitha Matheney of Burgan Real Estate.
Real estate is so cheap that many 20-somethings can become homeowners just a few years out of school. Indeed, 30% of buyers here are under 30, one of the highest percentages in the nation, according to a recent realtor.com study.
Finding a three-bedroom, two-bath home under $160,000 in suburban communities like Austintown or Boardman is very doable. Many of these move-in ready homes have a finished basement and two-car garages.
2. Peoria, IL
Median list price: $136,500 Share of homes with monthly mortgage of $1,000 or less: 61.2%
Home listed for less than $80K in Peoria, IL
From the late 1800s to Prohibition in the 1920s, Peoria was a whiskey-distilling juggernaut. During this boozy heyday, local brewmasters were building grand homes throughout the city’s downtown. History buffs can pick up one of these historic homes with large front porches for as low as $80,000. Some are move-in ready, while others require some work.
“This gets people to buy instead of rent,” says Ryan Cannon, a Realtor at Re/Max Traders Unlimited. Leasing a home can cost $1,000 to $1,200—more than a mortgage payment. “It’s a no-brainer to buy.”
And it looks like prices will stay low. The pace of home price growth here, 1.2% year over year, is lagging well behind the national growth of 6.9% during the same period. That’s at least partly due to the 2017 departure of Fortune 100 Caterpillar, which moved its headquarters closer to Chicago. Many of those workers put their properties on the market, leading to a glut of higher-end homes for sale.
And buyers in this Illinois city must keep an eye on property taxes; they’re double the average property tax rates for the nation, according to ATTOM.
Median list price: $130,000 Share of homes with monthly mortgage of $1,000 or less: 61.1%
When most folks think of New York, low prices rarely come to mind. But those who head to the former industrial hub of Binghamton, about three hours northwest of New York City, can find plenty of three-bedroom Cape Cod and ranch homes selling for less than $150,000.
Prices are lower in this small, blue-collar city as a result of manufacturing job losses over the decades—including the 1990s job cuts by IBM, a company that was originally founded in this metropolitan area.
“I have a lot of 20-somethings buying homes” because it’s so affordable, says local real estate broker Jessica Dillenbeck. “They probably started their lives renting or living with their parents, but quickly saved up enough money to buy.”
But before falling head over heals for that sticker price, folks best check into the property taxes. Just like Peoria, they’re high. The typical property tax rate here is 3.2%, compared with 1.2% for the nation.
Median list price: $143,300 Share of homes with monthly mortgage of $1,000 or less: 58.2%
Marshall University, one of the best public universities in West Virginia, is the main driver of new residents here. And many of its graduates choose to stick around this city, along the Ohio River, for its affordable homes and cost of living.
In fact, realtor.com recently named Huntington one of the best places to buy a starter home. And while there aren’t a ton of corporate jobs in the area, there are plenty of opportunities at the school and local hospitals. There’s also great hiking nearby at places like East Lynn Lake, and during football season almost 40,000 fans jam Joan C. Edwards Stadium to watch Marshall Thundering Herd football—the team that produced NFL stars like wide receiver Randy Moss. (It also inspired the 2006 big-screen Matthew McConaughey weepfest “We are Marshall.”)
Buyers of limited means can find brick, Cape Cod–style homes built in 1930s near the heart of downtown priced under $140,000. Or they can choose to go off the grid and find log cabins in the woods under $100,000.
As with most places on this list, there are substantial trade-offs.This community has been particularly hard-hit by the opioid crisis.
Median list price: $145,100 Share of homes with monthly mortgage of $1,000 or less: 56.2%
The Catch-22 in real estate is that to find lower prices you usually have to look in places with fewer good jobs. But despite being an affordable, smaller city along the Mississippi River, Davenport has a good mix of white- and blue-collar jobs. John Deere, an agriculture manufacturer, is headquartered in the metro.
Century-old, four-bedroom homes are available in neighborhoods such as East Davenport for under $80,000. And there’s a lot to pick from: Last year realtor.com discovered that Davenport has one of the highest concentrations of properties listed on the National Register of Historic Places.
Mortgage borrowers here walk away paying a lower share of their income to debt (7% less than the national average). That means more dollars for drinks on tap at the Great River Brewery in Davenport or admission to the local Putnam Museum & Science Center.
Median list price: $150,000 Share of homes with monthly mortgage of $1,000 or less: 54.7%
Located at the foothills of the Blue Ridge Mountains just a short drive from George Washington and Jefferson National Forest, Lynchburg has a nice outdoorsy vibe. But most importantly this college town, home to Liberty University and University of Lynchburg, has retained its affordability.
“With our lower price point, we have a lot of first-time home buyers,” says Scott Fogleman, associate broker at Keller Williams Lynchburg. Many of them wouldn’t be able to afford homes on one income in pricier Virginia markets, he says. “I see a lot of single women buying homes who haven’t been out of school that long.”
The city’s downtown also boasts some one-of-a-kind buildings. The Spanish Steps in Rome are a breeze compared with the series of steps leading up to the Lynchburg Museum, a towering building with huge pillars at its entrance.
While some old-money suburbs like Boonsboro won’t offer reasonable prices, most areas within city limits are more affordable. The city is packed with lots of postwar bungalows and Cape Cods priced under $120,000.
7. Erie, PA
Median list price: $155,100 Share of homes with monthly mortgage of $1,000 or less: 52.3%
Many larger Rust Belts cities are seeing a resurgence after years of revitalizing parts of their downtowns. That’s led to higher prices. As buyers increasingly struggle to afford homeownership, they might want to give Erie a look.
This place is very much a lake town, with a boat-filled harbor, picturesque old lighthouses, and sandy beaches on Lake Erie. Real estate is very affordable because the city has sustained decades of both blue- and white-collar job losses.
“You can get a move-in ready, three-bedroom home, maybe with a garage on a decent-sized lot” and pay less than $1,000 a month for it, says local real estate agent Stacey Santos of Keller Williams Realty.
Even three-bedroom homes just minutes from the shores of Lake Erie can be found for just $130,000. And they come with a big garage perfect for storing personal watercrafts and other lake toys.
Median list price: $160,400 Share of homes with monthly mortgage of $1,000 or less: 50.4%
Ranch house in Fort Smith, AR
Fort Smith might be the second-largest city in Arkansas, but it has retained its small-town feel with a main strip lined with churches and mom and pop businesses. Also, the Parrot Island Waterpark is a bit farther out. (Some local trivia: The visitors center is housed in a former brothel!)
Home prices here are 56% less than in Fayetteville, about an hour north, and 17% less than in Little Rock, about two and a half hours northwest. But that’s likely because nearly 26% of the population lives below the poverty line within the city limits.
Suburbs south of downtown are full of three-bedroom, two-bath ranch homes. This ranch with a covered patio is selling for $139,900. That breaks down into a mortgage payment of just $641 a month and property taxes of just 1,400 for the year.
Among all of the places we ranked, Fort Smith has the lowest property taxes, with an average rate of just 0.8% of the home’s value, according to ATTOM.
9. Mobile, AL
Median list price: $179,800 Share of homes with monthly mortgage of $1,000 or less:45.4%
Downtown Mobile, AL
Before New Orleans was even founded, Mobile, then capital of colonial French Louisiana, was already hosting Mardi Gras. To this day the city continues its celebration, with floats and funky costumes, something that attracts retirees who want the feel of the Big Easy, but without the hordes of tourists.
“A lot of people from other states will come visit and stay in Airbnbs in Mobile—and then decide they want to move down,” says Christy Gustin, a Realtor with Bellator Real Estate & Development. “I get a lot of California people … [who] are surprised by what they can get here.”
Homes around the Midtown Historic District, packed with grand homes from the antebellum days, are a favorite for folks moving into town. Look no further than this three-bedroom with picket white fence for $159,000—it’s right on the parade route.
10. Macon, GA
Median list price: $173,800 Share of homes with monthly mortgage of $1,000 or less: 45.2%
Four-bedroom home in Macon, GA
The South is filled with new homes going up at a breakneck pace. Many aren’t too affordable—except in Macon. There are numerous brand-new, three- and four-bedroom, three-bathroom homes with walk-in-closets going for under $150,000 in sprawling subdivisions.
The reason for the bargain-basement prices: Macon, about a 90-minute drive from Atlanta, isn’t exactly booming. But it’s not a wasteland either—there are museums, orchestras, and some good high-end restaurants downtown, with plenty of new places opening. That’s led to an increase in median home list prices in the metro of 15.4% year over year as of April 1, according to realtor.com data.
“People from Atlanta think the prices here are unbelievably low,” says local real estate agent Lucy Allen of Sheridan Solomon & Associates. The median home price in the Atlanta metro area is roughly double, at $336,900. ”
* A metropolitan statistical area is a designation that includes the urban core of a city and the surrounding smaller towns and cities. We limited the ranking to no more than two metros per state.
** The figures for the median list price are for the full month of April. The figures for the share of homes with a monthly mortgage of $1,000 or less were pulled from realtor.com the last week of April.
The post A $1,000 Monthly Mortgage Is Real—in These 10 Bargain Cities appeared first on Real Estate News & Insights | realtor.com®.
Source: Housing Trends Feed