Moving to a new city can save you thousands of dollars on housing. Here are the cheapest states to get a mortgage
Matthew Richmond and his partner, Randy, loved living in San Francisco, but it was getting more and more expensive. Their 700-square-foot basement garden apartment was costing them $4,000 a month.
“It was getting a little untenable” richmonda real estate agent, says.
They moved to Detroit in 2017. They bought a 100-year-old 3,200-square-foot Tudor/Colonial-style home for around $240,000 and started fixing it up. Richmond says their total housing costs are now about two-thirds to three-quarters of what they were in San Francisco, for a home more than four times the size.
“There were definitely advantages to moving here,” Richmond says. “We were able to afford something that we obviously couldn’t afford in San Francisco.”
With housing prices rising everywhere, but especially in what have traditionally been coastal towns with high living costs, many people have similar thoughts in Richmond. Michael Weinstein and his fiancée moved from Boston to Chicago in 2020 in a bid to find an affordable home. They found one in the Lincoln Park area of the city earlier this year. “There were a bunch of reasons, but a big part of it was the possibility of buying something in Chicago,” he says.
In dollar terms, the difference between home prices in different parts of the country can be huge. But there are other factors to weigh before deciding whether such a decision makes sense.
Here’s what you need to know before you do anything.
The cheapest and most expensive cities to buy a house
The cost of buying a home varies widely across the country, depending on economic trends, jobs, amenities, and other factors. “The most expensive markets are in the western region of the country, but the rapidly rising prices are also in the southern region,” says gay coronationSenior Economist and Director of Housing and Commerce Research at the National Association of Realtors Research Group.
| Region | Median selling price | +/- Above or below the national average |
|---|---|---|
| Where is | $514,600 | +$152,900 |
| Northeast | $389,800 | +$28,100 |
| National average | $361,700 | — |
| South | $326,300 | -$35,400 |
| Midwest | $261,300 | -$100,400 |
*Data from the fourth quarter of 2021, according to preliminary data of the National Association of Realtors (NAR).
There is a big gap between the most expensive cities in the United States and the least expensive, in terms of house prices. For example, the difference in house prices between the West and the Midwest is over $250,000. According to NAR data, you could buy a home at the median price in each of the 10 cheapest cities for the price of a home in San Jose, California with the remaining change.
Metro areas with the highest median home price in Q4 2021, according to RAN datawere:
- San Jose-Sunnyvale-Santa Clara, Calif., at $1.675 million;
- San Francisco-Oakland-Hawardy, Calif., at $1.31 million;
- Anaheim-Santa Ana-Irvine, Calif., at $1.15 million;
- Honolulu, HI, at $1.05 million; and
- San Diego-Carlsbad, Calif., at $845,000;
The metropolitan areas with the lowest median price were:
- Decatur, Ill., at $110,400;
- Peoria, IL, at $132,200;
- Youngstown-Warren-Boardman, OH-PA, at $136,400;
- Cumberland, MD-WV, at $137,900; and
- Davenport-Moline-Rock Island, IA-IL, at $147,500.
Pro tip
A city with cheaper house prices is not necessarily cheaper to live in. Look at insurance, property taxes, and other secondary costs to see if you could actually save money.
Over the past two years there have been significant trends in migration from cities with high cost of living to cities with lower cost of living due to rising prices, work environments more flexible and low interest rates. A study by housing data firm CoreLogic found that these trends are easing somewhat as the pandemic wanes and employers expect more in-person work. Affordability, landscaping and employment opportunities have pushed people from more expensive places like San Francisco, Los Angeles, New York and Seattle, says Selma HeppDeputy Chief Economist at CoreLogic.
“They started moving more to areas that were more affordable but also had more outdoor amenities, whether it was lakes, mountains or beaches,” she says. “As a result, we have seen house prices in areas like Idaho and Utah, Wyoming, Arizona and Colorado increase.
The cost of a mortgage in other states
Don’t worry about shopping around to find which state has the best interest rate on a mortgage, says Kimber White, a partner at Florida mortgage broker RE Financial Services. Interest rates do not vary greatly from state to state.
The interest rate might be the same, but there might be differences in other costs associated with closing a home, White says. Title insurance, legal fees and other closing costs may vary slightly, up to a few thousand dollars.
Another way the costs can vary is related to the price of the house. All costs calculated as a percentage of home value will differ significantly if you’re looking at big price differentials, Hepp says. “A lot of times if you get a bigger mortgage in a more expensive area, those closing costs will be higher.” For example, if closing costs are 4% of the loan amount, the amount paid in closing costs increases significantly as house prices increase.
The same goes for the down payment. A 20% down payment for a $250,000 home is much less than 20% for a $600,000 home.
Important Cost of Living Considerations
The price of the house and what you can afford are not exactly the same. Moving to a city with cheaper homes won’t necessarily save you money if you have to take a big pay cut to do so. Look at how much money you can make in that town first before determining what your home-buying budget should be, says Cororaton.
People who can work from home – from anywhere – have more freedom to move to an affordable city. “With working from home, it doesn’t make sense to live in a place that’s just very expensive,” she says.
As a general rule, you should not spend more than 30% of your income on housing. Cororaton suggests looking at your budget and determining if where you live keeps you above that threshold. “If you’re spending 50% of your income on housing, it’s very unaffordable,” she says.
Consider other factors, such as property taxes and insurance, Hepp says. “In areas that have more perilous risks, hurricanes, tornadoes, floods, fires, you can have higher home insurance. There are also areas that flood a lot, you must have additional flood insurance. Or you must have additional earthquake insurance.
Richmond saw firsthand the effect of secondary costs when he moved to Detroit. Home values are lower, but property taxes and insurance costs are higher. In Detroit in particular, it’s because population decline has left fewer people to cover the services of a much larger city by area. “It was a bit of a sticker shock to realize that Detroit has huge insurance rates,” he says. Property taxes are also among the highest in Michigan.
Geoarbitrage: Is moving cities to save money a good idea?
Moving out of an expensive place can make sense financially, but Hepp says there are more factors to consider than how much you spend on a home. “It depends on what you are looking for in life. It is hot? Does he do a lot of things outside? Doesn’t he pay taxes? »
When looking for a cheaper place to live, Richmond says they first looked at other parts of the Bay Area, then cities in the northern US – ‘We were looking for seasons’ , Richmond says — like Seattle, Portland, Minneapolis and Chicago. Then Randy returned from a work conference in Detroit impressed by the city and its architecture.
Before you get too far browsing through listings of homes in an unfamiliar city, Hepp suggests giving it a try, if your budget and circumstances allow. “Maybe move there a few months first, rent or do an AirBnb or something before buying a house.”
“Sometimes people are blinded by this idea that it’s going to be better, that the pasture is greener on the other side,” Hepp says. For those considering a transition, Hepp says to make sure the new home offers the lifestyle they want. “They go there and then they realize that I miss all these cultural conveniences, that I miss unplanned social interactions or things that you get in a more urban environment.”
A big money-saving move could be done in the short term, White says. But it is important to move to where you can be satisfied. “I think it depends more than anything on what they want to do with their quality of life,” he says.
Moving to save money can open up other financial possibilities. It was a goal for Weinstein when they moved from Boston to Chicago. “I wanted to be able to maximize my retirement accounts while having a life and hobbies. I really want to be on the road to financial independence. Moving here was a big part of that.
Richmond says moving from San Francisco to Detroit meant cultural changes. The geography and the people were different, and it took some getting used to. “It just took time to find the beauty here. There are tons of them, just look.
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