Saving

The top 5 increasingly affordable U.S. cities and how much it costs to buy a home there

Knowing as much as you can about your new city is “always a good idea.”

Share
Twenty/20

Almost 9 million Americans have relocated since the start of the pandemic, according to data from the National Association of Realtors. And more want to: A third of adults polled in a Redfin survey said they would consider moving if they could work remotely indefinitely.

Some people are taking advantage of deals in major metro areas, while others are flocking to the suburbs. If affordability is a factor in your decision, it pays to look at price trends as well as current costs.

Researchers at Zillow analyzed the 100 largest markets in the United States to find the top areas where the typical home value is no higher than $300,000, compared to the national median of about $266,000. The data also keys out the most "affordable" areas, where the share of income needed to pay for a normal monthly mortgage fell the most between 2018 and 2020.

Of the markets that were already affordable in terms of typical home value, here are the top five that have gotten more even affordable, as the amount of income needed for a mortgage dropped as well. Florida takes three of the five spots on the list since it has a high number of small metros relative to other states.

1. Orlando, Florida

Typical home value, December 2020: $273,214
Share of typical homeowners' income needed for monthly mortgage, December 2018:
21.5%
Share of typical homeowners' income needed for monthly mortgage, December 2020:
18.1%
Affordability improvement:
3.4 percentage points

2. Melbourne, Florida

Typical home value, December 2020: $245,237
Share of typical homeowners' income needed for monthly mortgage, December 2018:
22.8%
Share of typical homeowners' income needed for monthly mortgage, December 2020:
19.7%
Affordability improvement:
3.2 percentage points

3. Lakeland, Florida

Typical home value, December 2020: $209,148
Share of typical homeowners' income needed for monthly mortgage, December 2018:
21.4%
Share of typical homeowners' income needed for monthly mortgage, December 2020:
18.5%
Affordability improvement:
2.9 percentage points

4. Greenville, South Carolina

Typical home value, December 2020: $220,747
Share of typical homeowners' income needed for monthly mortgage, December 2018:
17.1%
Share of typical homeowners' income needed for monthly mortgage, December 2020:
14.7%
Affordability improvement:
2.4 percentage points

5. Little Rock, Arkansas

Typical home value, December 2020: $165,040
Share of typical homeowners' income needed for monthly mortgage, December 2018:
13.8%
Share of typical homeowners' income needed for monthly mortgage, December 2020: 11.4%
Improvement in affordability: 2.4 percentage points

VIDEO6:3506:35
Coronavirus: How the pandemic is affecting renters and homebuyers

Video by Richard Washington

Figure out the down payment you can afford

Home values went up 8% in the past year and will likely increase another 10% in the next year, Zillow data shows. If you're saving up to be a homeowner in a new city, experts suggest you take a measured approach.

"First, do the research. Determine the costs of the move, and then make sure that you have savings in case anything changes," says Chris Totaro, a real estate agent at Warburg Realty.

That may include renting first, so you can ensure you like your new city before you make the financial commitment of buying. A short-term lease could be a good option to accomplish that, experts say.

"Rent for the first year," Mark La Spisa, a certified financial planner and president of Vermillion Financial Advisors, told Grow. "If you buy versus if you rent, you cut your flexibility down. If you're going to move somewhere new, you want flexibility to get the lay of the land."

Determine the costs of the move, and then make sure that you have savings in case anything changes.
Chris Totaro
Warburg Realty

Don't tap your retirement savings or emergency fund to buy a home more quickly, as that could put you in a bind later on if you fall into financial hardship or need expensive repairs.

Instead, determine how much you need for a down payment and stash away a bit of money at a time until you reach that goal. It may not take as long as you think. With just $300 per paycheck, for example, you could have enough for the typical down payment on a home in just a year.

The median down payment is only 7.6%, and according to Bankrate data, lenders often ask for a minimum between 5% and 15% to obtain a mortgage. Certain federally backed mortgages require as little as 3.5%, and in rare cases, you could put nothing down at all.

There are also local down payment assistance programs for those who need a boost.

Have a 'fundamental understanding' of your money

Three of the top 5 places on Zillow's list are in Florida, which has been a popular destination for people throughout the pandemic. Florida residents don't pay state income tax, and the state ranks No. 26 on WalletHub's 2020 list of states with the lowest property taxes: Effectively residents pay less than 1%. In New Jersey, which ranks last on the list, residents pay 2.47% for property taxes.

"If moving out of state, make sure to have a fundamental understanding of any new taxes you may be subject to," or that you will avoid, says Garrett Derderian, the director of market intelligence at real estate firm SERHANT. "Some states have no state income tax, while in others it could be a considerable sum. Be sure to budget any income changes you may face."

While taxes can lower or increase your overall cost of living, there are other financial considerations to think about, and it's smart to consider the full picture, experts say.

VIDEO6:2806:28
3 tips for buying your first home in a crowded market

Video by Richard Washington

An estimated 41% of Americans are working from home, according to Upwork, but not every worker will get a chance to try or continue telecommuting, for example. You'll need to figure out if you can move to a new city and keep your job or if you need to find a new one. A steady income stream can make it easier to secure housing.

Among the top considerations for a move is undoubtedly the job market, Derderian says: "The vaccination rollout continues, will your employer still let you work from home? While some have committed to not fully reoccupying their spaces, make sure your role is one that can be deemed remote long term. Check with your employer on what their plans are for 2021 and beyond."

Different cities have different cultures, too, and you'll want to make sure you can be happy where you are.

"Moving to a new location can be exciting, but make sure you have a backup plan if things don't work out," says Totaro. "Knowing as much as you can about your new city and having some savings or access to funds is always a good idea."

More from Grow: