Mortgage

Federal states and cities with the most affordable homes in 2022

Which states have the cheapest houses?

As property prices continue to rise, many prospective buyers are looking for affordable housing outside their current zip codes.

The good news is that house prices are not rising at the same pace everywhere.

If you are looking for affordable homes in 2022, the South, Southeast, or Midwest could be your best choices. Some states keep popping up for having 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 requires some research and flexibility. But it's not impossible. Here's what you should know.

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

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Consider looking further for cheap accommodation

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

“The good news is that there are jobs almost everywhere in the country today and many people can now work from home. This enables people to move almost anywhere to find a home they can comfortably afford, ”said Rick Sharga, executive vice president of RealtyTrac.

"A house is considered affordable if the housing costs do not make up more than 30% of the monthly budget of the owner or the family."

According to Gay Cororaton, senior economist and director of housing and commercial research for the National Association of Realtors (NAR), a home is considered affordable when housing costs do not exceed 30% of the family budget.

“That's because a family has other essential expenses – food, clothing, education, health, student debt, leisure, and savings for retirement. If home buyers cannot afford the mortgage, they may lose their home, including the savings that were used to pay the down payment, ”she says.

Wondering where to find these mythical affordable homes? Here are a few suggestions.

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

"Hidden Treasures" in the real estate market

In its latest 2022 Housing Market Hidden Gems report, the NAR named the top 10 markets with strong underlying property market fundamentals, but where property prices remain undervalued and relatively cheap.

These areas are expected to see bigger price increases this year – this is how buyers who get in earlier can benefit the most.

The NAR's Hidden Gem Markets are in alphabetical order:

Dallas-Fort Worth, TexasDaphne-Fairhope-Farley, AlabamaFayetteville-Springdale-Rogers, Arkansas-MissouriHuntsville, AlabamaKnoxville, TennesseePalm Bay-Melbourne-Titusville, FloridaPensacola-Ferry Pass-Brent, FloridaSan Antonio-Carolina-New York

"Essentially, these are markets where prices are still affordable based on the ratio of home prices to wages and which have strong market conditions such as employment and wage growth," Cororaton says.

“In these markets, home prices are three times or less than the average family income. Compare that to an area like San Francisco, San Jose or Los Angeles, where real estate prices are seven times the income level. "

She points to Tucson as being particularly good value for money.

“Tucson is very cheap compared to Phoenix. In the second quarter of 2021, the average home value was $ 261,046, three times the average family income compared to the average Phoenix property – that's $ 364,186, 4.3 times the average family income, ”Cororaton added.

Big cities with the cheapest houses

Based on a recent report from ATTOM, many potential buyers still have several large metropolitan areas within reach – albeit fewer in this latest study than in previous ATTOM studies.

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

"According to this report, there are several large metropolitan areas that are still relatively affordable for most homebuyers," Sharga explains. These include:

Chicago, IlinoisHouston, TexasDallas, TexasSan Antonio, TexasDetroit, MichiganPhiladelphia, Pennsylvania Cleveland, OhioColumbus, Ohio

“Even in smaller metropolitan areas like Allentown, Pennsylvania, housing is relatively affordable; Decatur and Peoria, Illinois; and Macon, Georgia. In all of these cities, home ownership spending is typically less than 28% of local monthly wages, ”Sharga added.

The last point is important because what is affordable for a buyer is just as much dependent on their income and financing costs as they are on the list price of a home.

“In some markets, home prices can be much lower than the national average, but local wages can be even lower. It is therefore imperative that buyers examine their own finances and property prices carefully before making a purchase, ”recommends Sharga.

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

Another variant of the cheapest cities

These aren't the only rankings that you should consider carefully. Other sources also publish affordable market lists. (Although many of the same conditions keep popping up.)

For example, mortgage lender Better recently released its list of 10 Cheapest Cities in America:

Knoxville, TennesseeMemphis, TennesseeKalamazoo, MichiganJacksonville, FloridaSt. Louis, MissouriColumbus, OhioOklahoma City, OklahomaLas Vegas, NevadaBuffalo, New YorkSan Antonio, Texas

“It's important to look at the Cost of Living Index for a given market or city, which can give a glimpse of how expensive everyday goods and services are, including the price of a gallon of milk, a visit to the doctor, and more. "Notes Christian Wallace, Head of Real Estate Services at Better.

“As you can imagine, the cost of living can vary dramatically from place to place. With more affordable homes requiring smaller down payments, it's not surprising that many people are keen to find cities where the dollar goes further. "

Tips for Buying a Cheap Home

Finding an affordable home is only part of the process. You also need to secure funding, accept your offer, and close the deal.

Do you want to improve your chances of success at every stage of the property buying process? Follow these tips from the experts.

1. Look further outside the city center

“A large part of the search for affordable housing depends on the geographical location. As a rule, the farther you are from the city center, the cheaper the living space becomes, ”advises Sharga.

"Likewise, the further away you are from coastal areas or other high-demand locations, the lower the prices," he adds. "Newer homes tend to be more expensive than older homes too, so it can be helpful to look in more mature, more established areas."

2. Find a great real estate agent

Local brokers and agents can help you identify areas within a market that may be cheaper than others.

“Many buyers start their search virtually and on their own, but you really need a real estate agent to help you find and buy real estate – an expert who can help you get a good price offer based on their knowledge of the market conditions in the region . “Says Cororaton.

To learn more about choosing a real estate agent, read 6 Tips to Finding a Good Real Estate Agent.

3. Consider a fuser upper

Don't be afraid to also consider entry-level and fixer-top properties.

"Fixer-upper can be a great way to buy a home at a bargain price, and loan programs like the FHA's 203K loan allow repair costs to be included in the mortgage, which minimizes your cash needs," suggests Sharga.

4. Don't forget the property taxes

Property taxes are another important factor to think about.

Remember, most homeowners add their property taxes to their monthly mortgage payments. So your tax rate can have a huge impact on your home purchase budget.

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

5. Choose your mortgage carefully

Careful shopping for the right mortgage can also make a world of difference.

"Comparing different lenders and loan programs shows you a number of loans you may qualify for and gives you the best chance of finding a lower interest rate that can cut your buying and property costs," continues Wallace.

Mortgage rates can vary widely from lender to lender. And your interest rate determines your monthly interest payment, which affects the total amount you can borrow. So when you find the lowest rate you are not only saving money month to month; It can even help you afford a more expensive home.

6. Find assistance with down payment and closing costs

Remember to take advantage of buyer support programs when you are eligible and available. Every state has down payment support programs that can help you raise the upfront payment required to secure a home. Take a closer look at these resources:

The bottom line

Keep in mind that mortgage rates are likely to rise further over the next several months as the Fed pushes inflation back.

"Also, given the significant substructure in the housing market, you don't expect home prices to fall," Cororaton added. "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 involves moving out of the state.

"If you can afford a home now and are thinking of buying in your life cycle, try not to postpone your purchase," says Cororaton.

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