Which states have the cheapest homes?

As home prices continue to climb, many potential buyers are looking for affordable housing outside of their current zip codes.

The good news is that home prices are not rising at the same rate everywhere.

If you’re looking for affordable homes in 2022, the South, Southeast, or Midwest might be your best bet. A few states repeatedly come forward for some of the cheapest homes on the market, including Texas, Florida, Tennessee, Ohio, and Michigan. And these are not the only ones.

Finding a cheap home in 2022 will take research and flexibility. But it is not impossible. Here is what you need to know.

Check your eligibility to buy a home. Start here (January 11, 2022)

In this article (Skip to …)

Consider looking further for inexpensive accommodation

If the real estate market is hot in your current area, it often makes sense to look at different cities or states where housing is cheaper. It could help you get into a home and start building equity much sooner than you might have imagined.

“The good news is that there are jobs available almost across the country today, and many people can now work from home. This allows people to consider moving almost anywhere to find a home they can comfortably afford, ”explains Rick sharga, Executive Vice President of RealtyTrac.

“A house is considered affordable if the housing expenses do not consume more than 30% of the owner’s or family’s monthly budget. ”

According to Gay Cororaton, senior economist and director of housing and business research for the National Association of Realtors (NAR), a home is considered affordable if housing expenses do not consume more than 30% of the family budget.

“It’s because a family has other essential expenses: food, clothing, education, health, student debt, recreation, and retirement savings. If homebuyers can’t afford the mortgage, they can end up losing their home, including the savings used for the down payment, ”she says.

Are you wondering where to find these legendary affordable homes? Here are some suggestions.

Check your eligibility to buy a home. Start here (January 11, 2022)

“Hidden gems” in the real estate market

In its latest report, Hidden treasures of the housing market 2022, the NAR named the top 10 markets with strong underlying housing fundamentals, but where house prices remain undervalued and relatively cheap.

These areas are expected to experience more price appreciation this year – so buyers entering early could benefit the most.

The NAR Hidden Gems Markets, in alphabetical order, are:

  1. Dallas-Fort Worth, Texas
  2. Daphne-Fairhope-Farley, Alabama
  3. Fayetteville-Springdale-Rogers, Arkansas-Missouri
  4. Huntsville, Alabama
  5. Knoxville, Tennessee
  6. Palm Bay-Melbourne-Titusville, Florida
  7. Pensacola-Ferry Pass-Brent, Florida
  8. San Antonio-New Braunfels, Texas
  9. Spartanburg, South Carolina
  10. Tucson, Arizona

“Essentially, these are markets where prices are still affordable, based on the ratio of house prices to wage income, and which have strong market conditions such as job growth and wages,” says Cororaton.

“In these markets, house prices are three times or less than the median family income. Compare that to an area like San Francisco, San Jose, or Los Angeles where house prices are seven times the income level. ”

She calls Tucson excellent value for money.

“Tucson is very affordable compared to Phoenix. In the second quarter of 2021, the median property value was $ 261,046, which is three times the median family income compared to the median property value in Phoenix, which is $ 364,186, or 4.3 times the median family income, ”adds Cororaton.

Big cities with the cheapest houses

Based on a recent ATTOM report, several large metropolitan areas are still within reach of many potential buyers, although fewer in this new study than in previous ATTOM studies.

In fact, of the 575 counties in the report, only 135 (23%) are more affordable than their historic affordability averages in Q4 2021.

“According to this report, there are several large metropolitan areas that are still quite affordable for most home buyers,” says Sharga. These include:

  1. Chicago, Ilinois
  2. Houston, texas
  3. Dallas, Texas
  4. San Antonio, Texas
  5. Detroit, Michigan
  6. Philadelphia, Pennsylvania
  7. Cleveland, Ohio
  8. Columbus, Ohio

“Homes are also relatively affordable in smaller metropolitan areas like Allentown, PA; Decatur and Peoria, Illinois; and Macon, Georgia. In all of these cities, homeownership expenses are typically less than 28% of monthly local wages, ”Sharga adds.

This last point is important because what is affordable for a buyer will depend as much on their income and the cost of financing as on the going price of a home.

“In some markets, house prices can be much lower than national averages, but local wages can be even lower. So buyers really need to do a careful assessment of their own finances as well as home prices before making a purchase, ”recommends Sharga.

Check your home buying budget. Start here (January 11, 2022)

Another look at the cheapest cities

These aren’t the only rankings to consider carefully. Other sources also publish affordable market listings. (Although many of the same states appear over and over again.)

For example, mortgage lender Better recently published his list of America’s 10 Most Affordable Cities:

  1. Knoxville, Tennessee
  2. Memphis, Tennessee
  3. Kalamazoo, Michigan
  4. Jacksonville, Florida
  5. St. Louis, Missouri
  6. Columbus, Ohio
  7. Oklahoma City, Oklahoma
  8. Las Vegas, Nevada
  9. Buffalo, New York
  10. San Antonio, Texas

“It’s important to look at the cost of living index for a given market or city, which offers a snapshot of the price of everyday goods and services, including the price of a gallon of milk, a visit to the doctor. , etc. ” Remarks Christian wallace, Head of Real Estate Services at Better.

“As you can imagine, the cost of living from place to place can vary widely. As more affordable homes require smaller down payments, it’s no surprise that many people are interested in finding cities where the dollar goes deeper.

Tips for buying a cheap house

Finding affordable housing is only part of the process. You also need to get financing, get your offer accepted, and close the deal.

Want to improve your chances of success every step of the way in the home buying process? Follow these expert tips.

1. Look further outside the city center

“Much of the search for affordable housing depends on geography. As a general rule, the further you are from the city center, the more affordable the accommodation will be, ”advises Sharga.

Likewise, the further away you are from coastal areas or other places of high demand, the lower the prices, ”he adds. “Newer homes also tend to be more expensive than older homes, so looking in more mature, established areas might help. “

2. Find a good real estate agent

Local agents and realtors can help you identify areas of a market that may be more affordable than others.

“Many buyers start their search virtually and on their own, but you really need a real estate agent who can help you navigate the process of finding and buying a home – an expert who can help you. to make a good price offer given their knowledge of market conditions in the region. , said Cororaton.

To learn more about choosing a buying agent, read 6 tips for finding a good real estate agent.

3. Consider a top fixer

Don’t be afraid to consider entry-level and remodel properties as well.

“Fixers can be a good way to buy a home at a lower cost, and loan programs like the FHA 203K loan will help build repair costs into the mortgage, thereby minimizing your cash needs,” suggests Sharga. .

4. Don’t forget the property taxes

Another essential factor to consider is property taxes.

Keep in mind that most homeowners have their property taxes added to their monthly mortgage payments. So your tax rate can have a big impact on your home buying budget.

“Property taxes vary by city, county and state. Lower property taxes give you more leeway to buy a more expensive home, ”Wallace adds.

5. Choose your mortgage carefully

Shopping carefully for the right mortgage can also make a big difference.

“Comparing different lenders and loan programs allows you to see a range of loans that you may qualify for and gives you the best chance of finding a lower interest rate, which can lower your cost of buying and selling. property, ”Wallace continues.

There can be a big difference in mortgage rates from one lender to another. And your rate will determine your monthly interest payment, which will affect the total amount you can borrow. So finding the lowest rate won’t just save you money month-to-month; it can also help you afford a more expensive home.

6. Find the down payment and closing costs assistance

Remember to pursue buyer assistance programs if you qualify and they are available. Every state has down payment assistance programs that can help you find the down payment you need to secure a home. Take a closer look at these resources:

The bottom line

Keep in mind that mortgage rates are expected to continue to rise over the next several months as the Fed restrains inflation.

“Also, don’t expect house prices to drop, given the significant under-construction in the housing market,” Cororaton adds. “Home prices will continue to rise, albeit at a slower pace this year.”

These are other reasons to take a closer look at affordable areas across the country, even if it requires leaving the state.

“If you can afford a home now and you are in your lifecycle where you plan to buy, don’t put off your purchase if possible,” says Cororaton.

Check your new rate (January 11, 2022)