This woman bought a four-bedroom, two-bathroom house for $135,000. In the Midwest, it's still possible.
After more than two decades of renting, Alicia Williams bought her first home this December in St. Louis.
A city native, Williams hadn't considered homeownership until she played around with a mortgage calculator and realized her monthly payments could approximate what she was paying in rent.
"Why am I here paying somebody's property taxes when I could be doing this on my own?” Williams, a Gen Xer who works at an auto assembly line, told Yahoo Finance. “So I went ahead and just took the leap of faith.”
With home prices soaring, the Midwest provides a rare opportunity for homebuyers. The region is the most affordable in the US, and its cities dominate recent rankings for best places to buy a home thanks to their relatively affordable housing costs, thriving local economies, and friendly communities.
“The Midwest stands out as an attractive region for aspiring homeowners because affordable housing is present and accessible there, and it’s scarce almost everywhere else,” Skylar Olsen, Zillow’s chief economist, told Yahoo Finance. “A larger number of affordable listings and less potential competition over those listings helps Midwest markets shine in this ranking.”
St. Louis topped Zillow’s list of the best cities for first-time homebuyers, joined by four other Midwestern cities. More than half of Realtor.com’s top housing markets are also located in the Midwest, according to the site’s spring market ranking.
Read more: First-time home buyer in 2024: What you need to know
Affordability from renting to buying
Williams bought her four-bedroom, two-bathroom house for around $135,000. The monthly payment on her 30-year mortgage at 6.4% is about $1,200.
The Midwest has the lowest mortgage payments in the US: $1,553 vs. the national median of $2,100.
Although rates have more than doubled compared to three years ago, Williams views the volatility as part of the process.
"If [rates] do drop, they are not going to drop that much," Williams said. "If they do go up, I might as well go ahead and buy a house now."
Williams spends around 17% of her income on her monthly mortgage payment. She’s in the sweet spot: A good guideline is to spend 28% or less of your monthly gross income on housing expenses.
"I never feel stressed or overwhelmed with [making] mortgage payments," she said. "And I pay two to three weeks before the due date."
Homeowners in the Midwest are the least mortgage-burdened in the US, spending on average less than one-fifth of their paychecks on monthly payments.
According to the National Association of Realtors' March housing affordability index, the share of income spent on mortgage costs was less than 19% in the Midwest. By comparison, homeowners in the West pay 35% of their income on their mortgage and 25% in the Northeast and the South.
"If it was the rate of pay that I'm making here and going to another state, like Texas, for instance…I probably wouldn't have been able to buy a home. Or I would [have bought] a home but been house-poor," Williams said.
Paying relatively cheaper rent in St. Louis also helped Williams transition into homeownership. Her rent was around $1,150 — accounting for less than 15% of her monthly income. The average asking rent in the Midwest is about $1,460, making it America's cheapest renting region.
Midwest housing costs increased over the past couple of years but at a much slower pace than the rest of the nation.
“The Midwest did catch the pandemic-era wave of extreme price growth, but it was later and less pronounced than in other parts of the country,” Orphe Divounguy, Zillow’s senior economist, told Yahoo Finance. “Home prices in Midwest metros also started from a lower baseline, so even with massive appreciation, much of the housing stock is still affordable.”
Read more: Why are home prices so high?
Midwest gaining popularity
Home prices in St. Louis have stayed relatively flat and affordable since the beginning of the year, with the median home price hovering around $200,000. Almost all Midwest cities making the top 10 in Realtor.com’s ranking for best housing markets have median prices lower than the national average of $425,000 — they range between $212,500 and $525,000.
Home builders are feeling good about buyers’ demand in Midwestern markets, too — it was the only US region where building confidence grew in May, according to the National Association of Homebuilders. The number of new housing starts increased almost 20% monthly and close to 4% annually in April, Census Bureau data showed.
Tina Siebert, Williams's Realtor based in St. Louis, told Yahoo Finance she sees multiple bids on popular homes.
"I just don't feel inventory is coming up to where we need to be to get all of our clients in a home," Siebert said. "If you have a house priced within the ballpark, you're going to get a lot of action on that."
Inventory shortages and rising interest rates are no longer Williams's concern. She has settled into her home on a cul-de-sac.
"Every time I open the door,” she said, “I still can't believe it."
Rebecca Chen is a reporter for Yahoo Finance and previously worked as an investment tax certified public accountant (CPA).
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