Home prices have risen by record amounts in the past two years. Home prices nationwide rose 18.8% in December, compared with the same month in 2020, according to the carefully followed S&P CoreLogic Case-Shiller Indices. In three cities, the figure was above 25%: Phoenix (32.5%), Tampa (29.4%) and Miami (27.3%). In some smaller cities that have become popular, prices have increased by 50% in two years. This has sometimes made home values too high for long-time residents of these metropolitan areas.
Still, there are some metropolitan areas where housing prices remain cheap, and the cheapest city to buy a home is Peoria, Illinois. (You can buy a home for under $100,000 in these American cities.)
One reason for the rise in home prices in many cities is the migration from large coastal cities like San Francisco and New York where costs of living and home prices are high. Home prices in such cities can be three times the national average. Low mortgage rates also have helped make homes more affordable to buyers, although rates have risen recently. The exodus to smaller cities received yet another boost from the pandemic as millions of people began working from home, in many cases permanently, and became more mobile. (Speaking of New York and San Francisco, this is the American city with the most million dollar housing markets.)
Only a few cities continue to have relatively affordable home prices. To find the cheapest cities to buy a home, 24/7 Wall St. reviewed Realtor.com’s recently released As Home Prices Soar, Here Are the Cheapest Places in America to Buy a Home report. The report looked at 250 larger metropolitan areas to find those with the lowest median home prices in February. Only one metro area per state was selected to promote geographical diversity. 24/7 Wall St. added five-year estimates of median household income as of 2020 for each metro, using data from the U.S. Census Bureau’s American Community Survey.
Hannah Jones, economic research analyst for Realtor.com, said, “These areas generally have lower median incomes and lower costs of living, helping keep home prices lower.”
Some are old industrial cities that have lost population as the companies that anchored their economies have relocated or disappeared. Population loss and economic challenges can trigger high poverty, low education, and high crime. In turn, that makes these cities less attractive destinations.
This is the case with the city with the cheapest housing prices, which has been blighted. Peoria has a median home price of $98,000. The report says, “House hunters can find places starting at $30,000, including this historic four-bedroom asking $34,900,” which would need work to be habitable. The population of Peoria has dropped sharply since 1970. The median household income is just below $60,000, compared to a national figure of over $65,000.
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