With fixed mortgage rates rising by more than a full percentage point since May and more likely to go higher than lower, homes are becoming significantly less affordable for those not buying with cash. That means homebuyers still trying to take advantage of still-low mortgage rates might have to set their sights a little lower when shopping for what they can afford.
Why? Mortgages at a 5.5 percent annual rate are 12 percent more expensive than at a 4.5 percent rate, according to The Motley Fool, and at 6.5 percent, monthly mortgage payments are nearly 25 percent more costly than at 4.5 percent. And when rates recently slipped just slightly for the first time in weeks, home loan applications jumped.
Naturally, shopping for a less expensive home often means settling for a smaller one. The Motley Fool charted the average size of homes against the going interest rate at the time they were purchased. "As interest rates fell in the late 1970s, home sizes grew," it reported. "As rates rocketed in the early 1980s, home sizes contracted. After reaching a peak in the 1980s, mortgage rates have fallen precipitously, and homes have grown in almost every single year since." The average home built in 1975 was 1,535 square feet. By 2010, the average came in at 2,169 square feet.
For some large metro areas, "less expensive homes" might still mean the average three-bedroom home costs $300,000 and up. So we turned to some of the smaller market areas to see what we could find for around $100,000 -- or even less. In some cases, we found two-story homes with more than 2,000 square feet. Others were small ranch homes.
That you can get more square footage for your money in a smaller metro area is one of the 10 reasons BuzzFeed says that small towns are better than big cities. At the top of the BuzzFeed list: "Bye Bye Traffic Jams." AOL Real Estate took a look at seven smaller housing markets that would be quite affordable for those who don't have to live in Chicago, Atlanta or San Francisco, and found seven decent homes for about $100,000 or less.
SIZABLE HOMES FOR UNDER $100,000:
7 Affordable Homes in Smaller Markets
For Bigger Homebuying Value, Look in These Smaller Markets
The small town of Rock Island, Ill., is part of the Quad Cities about 175 miles west of Chicago, has a population of about 39,000. There’s a wide variety of housing available in Rock Island including historic homes, downtown condos, new construction in the heart of the city, and wooded retreats. And the prices vary, from a $1.45 million "House on the Hill" overlooking the Rock River Valley, to this three-bedroom, three-bath one pictured for under $100,000.
List Price: $99,900 - The brick "Magill House" at 2,253-square-feet is a registered historic home. Built in 1868 in the Italianate style, it was revived in 1992 with updates and additional improvements. There is a beautiful, winding wood staircase, hardwood floors on the main level, a master bath, a breakfast nook, built-ins, and heated three-car garage.
Spokane, home of the 1974 World's Fair, sits in the county seat of the same name. With just more than 200,000 residents, it is second largest city in the state of Washington but still small enough to rank low among major cities, giving residents the best of both worlds.
List Price: $99,500 - This updated Craftsman on the north side of town is nestled on the corner of a tree-lined street in a quiet neighborhood, according to its listing. At 3,054 square feet, this four-bedroom home is bigger than it might first appear and even has two rental units on site.
Located on the Mississppi River, Dubuque is home to baseball's "Ghost Players" -- the guys who played the old ballplayers in the Kevin Costner film "Field of Dreams." But it also likes to be known as the first town that was established in the state of Iowa, according to its Chamber of Commerce.
List Price: $118,840 - This three-story brick, historic federal-style farmhouse with a Dutch roof has been restored. It has six bedrooms, three baths, hardwood floors, and a front and a rear stairway. There are two cement patios, and one of them is fenced.
Omaha is the largest city in Nebraska, but is No. 42 on the list of largest U.S. cities, behind Mesa, Ariz., and Virginia Beach, Va. The city is also home to one of the wealthiest men in the world, Warren Buffet, who lives in one of the most modest homes for his status, as HuffPost Home has reported. The Wizard of Omaha has said "a house can be a nightmare if the buyer's eyes are bigger than his wallet."
List Price: $100,000 - One of the smallest on our list, this 1,025-square-foot single-family home (pictured) has three bedrooms and two bathrooms. Built in 1964 it has a tuck-under garage. However, we can't guarantee that if you buy it, you'll also gain even a quarter of Buffett's wealth.
Mobile goes by the slogan "secretly awesome," according to its tourism website, and is near Pensacola, Fla. It was also recently ranked No. 2 in U.S. metro cities with the highest economic growth potential by Business Facilities magazine, coming in behind Baton Rouge, La.
List Price: $69,900 - At 2,300-square-feet, this four-bedroom home has so much space for the money. The large living room leads to the family room with a gas-log fireplace. Its family room opens up to the kitchen and dining area, according to the listing. Out back, a patio leads to a guest apartment, which has a full bath and a kitchenette.
Louisville is home to the Kentucky Derby and the Muhammad Ali Center. The city also recently noted on its website that it has regained all 42,000 jobs that were lost during the recession. Louisville is outperforming several peer metro areas in post-recession job growth. Among the 100 most populated metro areas, the Louisville metro area ranked 26th in recovering from the recession, according to the Brookings Institution's Metro Monitor.
List Price: $100,000 - With three bedrooms, two full baths and hardwood floors, this pictured home has a large living room that goes across the whole front of the house. There is also a two-sided staircase, and a full bath on each floor. "The large backyard is perfect for family gatherings," says the listing.
Ranked at number 12 among the DMAs, it is hard to call Indianapolis a small town, but this Midwestern city about a two-hour drive from the Chicago metro area does have a small city feel, in comparison.
List Price: $100,000 - With 3 bedrooms and 2,635 square feet, this home is a bargain for a city of its size. Built in 1922, it has a covered porch, hardwood floors and stairs.