With the rising costs of homes, Americans are keener on savings than ever before. Houses that were once considered average homes for the middle class are now being seen as luxuries. There are still a few states where homes are affordable and in good condition.
Shift in Priorities
The 2008 financial crisis was thought to be a once-in-a-generation event that we would recover from. That didn’t turn out to be the case at all. It’s arguable to call this generation of young Americans to be the unluckiest generation in modern history.
The Economic Challenges of Housing
After WWII, the greatest generation built a foundation for the economy and handed it to baby boomers on a silver platter. Things were going great with some of the highest recorded growth in economic history. America was booming.
The housing market was seen as the foundation for much of the American economy for decades after WWII. Houses were plentiful and cheap. Low-skill jobs, like factory work, paid well, and the cost of higher education was also cheap.
Millennials were told and shown by their parents how normal, middle-class life was supposed to look like; a house with a white picket fence and 2.5 kids. Then, in 2008, when many millennials were graduating high school and college, the housing market crashed.
Jobs were scarce, pay was low, and college was astronomically more expensive compared to when baby boomers went to college. Because of this, millennials took lower-paying jobs and took fewer risks, choosing not to start a business or have children.
Then, Covid-19 hit in 2020. There is no way to put it lightly; this ongoing event decimated the economy and has destroyed countless lives. Just when we thought the worst economic event since the Great Depression was in the rearview mirror, something worse comes along.
Since the beginning of the pandemic, housing prices have skyrocketed out of control. Because of a labor shortage and higher costs of materials, few houses are being built. Job relocations have partly driven people from the cities to the suburbs.
High demand and low inventory created the perfect storm for would-be home buyers. Millennials are a generation of mostly renters, and with the rising prices of homes, it doesn’t look like it’s going to get much better.
WFH Is Giving Us a Choice
There is one silver lining to the pandemic. Because of the surge in the Work From Home business model, many people no longer necessarily have to live near their work. People can live pretty much wherever there is internet access now.
WFH cut out daily commutes and the costs associated with it, like vehicle maintenance and gas. There are certainly challenges and downsides to working remotely, though. People have to contend with internet disruptions, children, etc.
There are a few obstacles that make people hesitant about moving to a new area or a new state altogether. First is the cost of moving. Packing up and moving to a new place can easily cost thousands of dollars and time off of work.
Another deterrent is the possibility of employers pulling the rug out from under people and forcing them back to the office. We already see this happening with some companies that only embraced WFH as a temporary measure.
Companies have made it very clear that WFH isn’t great for every single type of job. It would be incredibly risky to move to a new place away from the office without a WFH guarantee.
It’s also difficult for some of us to move because it would mean leaving friends and family. Many people have families in more expensive parts of the country and are later priced out of being able to live in the neighborhoods they grew up in.
If you are willing to move and have a flexible job that allows WFH permanently, moving to another state with more affordable housing may be the right play to make. Luckily, there are many areas in the US that are still within financial reach.
Lowest Real Estate Costs
Much of the best properties for sale are in the Southern states. The number one reason why southern states have such inexpensive real estate is simple; there are fewer people. A lower population means lower demand for housing.
Big cities are not more expensive because they are of higher quality. They are expensive to live in because of high populations and high demand. A lot of people want to live in the same spaces, but land is not something you print more of.
Why Buy Cheap Property?
One of the biggest advantages of investing in a low-cost home is that it will likely only rise in value. It’s projected that millennials and younger generations will not be as financially well off as their parents, so low-cost housing will rise in demand.
Larger and more expensive homes may not necessarily rise in value in the future because it’s unclear if the demand will match the supply. So, that area of the market will likely fluctuate. Homes for the middle and lower class are virtually guaranteed to rise in value.
Another reason to buy cheap is to keep your mortgage payments as low as possible. In this day and age of job insecurity, you never know if your income will be slashed by unexpected layoffs or big life changes.
Doing so will allow for easier budgeting on additions and repairs to a home. Having to replace or fix things, even in new homes, is almost a certainty. You might as well save by having a lower mortgage. This will also minimize the interest you’ll have to pay off.
Having to pay a lower down payment will also take a load off your shoulders when comparing homes. A lower down payment means more money left over for a rainy day. It’s a good way to lower your financial risks.
You will be dealing with a lot less competition for cheaper properties. Less expensive property is, by association, less desirable because it’s often in less than ideal areas of the country.
Least Expensive Houses in America
West Virginia has the lowest home values in the country, with an estimated median value of about $115,000 to $120,000. However, those numbers are steadily rising and showing no sign of slowing down.
This state has a lot to offer. There is a lot of history and the seasons are very beautiful, especially autumn. A big perk to living there is the national parks. The Appalachian Trail is a wonderful source of free outdoor fun.
Mississippi Is also a great state to find inexpensive homes. The median price for a house is about $140,000. The cheapest cities are Jackson and Greenville. Rent is also fairly low, but Mississippi is rapidly getting more expensive.
Home prices have surged approximately 17% in the last five years. The state still has the lowest living costs in the country, though. Costs for homes are expected to go up because of the rise in material costs, buyer interest, and competition.
Arkansas is another promising prospect for good deals. The median price of a house is just under $150,000, and the cost of living is far below the national average. Things like healthcare and public transportation are decently below the national average as well.
Despite the higher costs of houses, the average cost to rent is actually a little bit lower in Arkansas than in Mississippi.
Be Careful What You Buy
There are all kinds of risks associated with buying a house, no matter where you are or how much it costs. Keep in mind that cheap houses are cheap for a reason. A good way to get a feeling for a neighborhood is to simply ask your would-be neighbors what they think of the area.
They can give you a keen insight into the pros and cons of the neighborhood. Ask questions about the crime rates, HOA benefits, and the quality of the local businesses. How they respond will inform your decision greatly.
There could be major problems uncovered that your research didn’t tell you about. Maybe the HOA doesn’t do a good job of maintaining plumbing systems or issues involving the local schools and universities.
Your would-be neighbors can also tell you the positives of the area you’re looking in. Maybe traffic is much lower than the state’s average, or the neighborhood has an annual block party that everyone goes to.
Once More Unto the Savings
Some of the cheapest states to live in have a lot to offer in terms of natural beauty and quality of living. If you are willing to move to a southern state, you can save big on a home or rental and get a lot more for your money.
Houses in states like Mississippi have homes that are relatively new and much larger compared to what you would get for the same amount of money in a coastal state.
Millennials are the unluckiest generation in US history | Washington Post
Implications Of Bringing Employees Back To The Office | Forbes
Those Surging Home Prices May Not (Totally) Be A Bubble | NPR