I recently sold my home for $173,500 and this, combined with my move across the country, has me thinking a lot about home affordability. While I’m not anxious to buy again anytime soon, I was interested to see how my new local real estate market compares with the market I left behind a few months ago.
First of all, I found there isn’t really anything in my new ZIP code that compares exactly to the home size, year built, and lot size I had previously owned. The closest I could find was a condo-type home (without the large yard we had) for $275,000.
The stand-alone homes with square footage similar to ours are 3 BD/2 BA homes, as opposed to the 4 BD/3 BA home we had in Utah. But these homes are right around $300,000 to $475,000. Buying a home in our new area, (which is part of the Philadelphia metro area) is much more expensive than it was in our semi-rural neighborhood in Utah.
Where is it affordable to buy a home right now?
Home Affordability Across the Country
There are many reasons we aren’t interested in buying right now, and the price we’d have to pay is one of the biggest. However, we’re not the only ones looking at home prices in metro areas and taking a step back.
According to a recent study by Interest.com, only 10 of the 25 largest metro areas in the United States has affordable homes to those with median incomes. Philadelphia’s metro area, where I live now, scored a “C” grade.
It’s probably no surprise that major metro areas are tough places to buy homes. Interest.com points out that, even though low mortgage rates can help, and even though home prices in general are still fairly low, the reality is that major metro areas are places where home ownership isn’t really all that affordable if you’re making a median income.
Unless you live in a place like Minneapolis, Atlanta, or one of the other 10 “affordable” cities on Interest.com’s list, you’re probably better off trying to avoid buying a home on a median income — at least if you don’t want to be house poor.
Avoid Becoming House Poor
While it might be tempting to buy a home in order to buy into what many still see as the “American Dream”, and what many others view as an important financial milestone, it makes sense to hold off and see if it really adds up for you.
In some cases, getting a home could mean becoming house poor. This is a situation in which most of your available income goes toward paying for your housing (mortgage payment, upkeep, utilities, etc).
If you have an expensive home, it might be impressive to others, but it limits your ability to do other things, buy what you want, or even set aside money for a rainy day. Buying a home just to buy can put you in a tough position financially.
Instead, it makes more sense to consider renting. Unless you live in an area in which you can get a low-cost, affordable home without straining your finances in other areas, buying in a major metro area might be a bad idea right now.
Do you live in an area where it’s affordable to buy? Or is renting a better idea than buying right now?