Where to Buy a Home for Less Than $800 a Month

[one...two...tree 2,762]

By Luke Mullins,, U.S.News

While the nation's real estate crash has been a nightmare for homeowners, it has created some outstanding opportunities for would-be buyers. Home prices in 20 major cities dropped 33 percent from the summer of 2006 to the spring of 2009--and in certain markets, the plunge was even steeper. At the same time, the federal government's efforts to revive the housing market have helped drive financing costs to record lows. Thirty-year fixed mortgage rates fell to an average of 4.32 percent for the week ending September 2. That's the lowest level in nearly 40 years of record-keeping. Lower property values and dirt-cheap mortgage rates have combined to restore affordability to many real estate markets that were once wildly overpriced. "Right now, housing is about as affordable as it has been since at least the 1970s," says Patrick Newport, a U.S. economist for IHS Global Insight.

To see how far your real estate dollar will stretch in different places across the country, U.S. News examined housing costs on a monthly payment basis. We started with the National Association of Realtors' median home price data for 159 distinct metropolitan statistical areas as of the second quarter of 2010. After subtracting a 20 percent down payment from a market's median price, we plugged the remaining figure into a mortgage calculator using a 4.32 percent interest rate on a 30-year fixed loan. The exercise produces a monthly payment figure for mortgage principal and interest, which represents the bulk of most property owners' monthly housing costs. (Note that this figure does not include monthly costs for utilities, insurance, or taxes, which can vary a great deal from one place to another. Nor does it reflect the one-time costs associated with a home purchase, such as the down payment and closing costs.) Using this calculation, here is a look at 10 places where you can buy a home for less than $800 a month.

1. Austin, Texas: Anyone who's ever visited lovely Austin knows that it's much more than just the capital of the Lone Star state. Great barbecue, abundant green space, and a world-class music scene have turned this city of 735,000 into one of the nation's most beloved destinations. And as the home of the University of Texas and the heart of a dynamic local economy, Austin offers a wonderful quality of life to residents and visitors alike. The median home price in the Austin area stood at nearly $197,000 in the second quarter of this year, a slight increase from a year earlier. After a 20 percent down payment--of $39,400--monthly payments for mortgage principal and interest on a median-priced home in Austin come to $782.

2. Sarasota, Fla.: Although exotic mortgage products and investor excitement sent home prices in Sarasota soaring during the housing boom, the subsequent crash hit the market as hard as anywhere in the state. Median home prices in the Sarasota area plummeted from $311,000 in 2007 to $185,000 in the second quarter of this year. But this steep drop only makes this sun-drenched community on Florida's west coast more attractive for home buyers, says Jack McCabe of McCabe Research & Consulting. McCabe says Sarasota's smaller size provides its residents with a more manageable lifestyle--with less traffic, for example--than big cities like Tampa Bay or Orlando. At the same time, the area has a beautiful waterfront and plenty of art museums and theater productions. Anyone considering buying property in Florida should have Sarasota at the top of their list, according to McCabe "It's a great market," he says. "I really expect in the next 20 years it is going to be one of the most desirable markets in Florida for baby boomers to retire." The median home price in the Sarasota area was $185,000 in the second quarter of this year. After putting 20 percent--or $37,000--down, monthly payments for mortgage principal and interest on a median-priced Sarasota area home come to $734.

3. Albuquerque, N.M.: A vibrant blend of Native American, Latino, and Anglo cultures makes Albuquerque one of the nation's most diverse communities. Residents can explore this unique heritage through the city's expansive menu of museums, art galleries, and theaters. Its enviable climate--which averages more than 300 days of sunshine a year--provides plenty of opportunities for golfing, biking, and hiking. During the winter months, skiers and snowboarders can hit the nearby Sandia Peak Ski Area during the winter months. The median home price in Albuquerque was $178,000 in the second quarter of this year, down about 2 percent from a year earlier. After a 20 percent down payment--or $35,600--monthly payments to cover mortgage principal and interest on a median-priced Albuquerque home are roughly $706.

4. Minneapolis/St. Paul: If you can stand the tough winters, the Minneapolis/St. Paul area is a great place for outdoor enthusiasts call home. The Twin Cities, as they are known, have more than 330 parks, and the Minneapolis metro area alone has more than 20 lakes. Golfers, meanwhile, can pick from more than 170 nearby courses. The median home price in the Minneapolis/St. Paul area was $176,000 in the second quarter of 2010, a decline of roughly 4 percent from the same period in 2009. Buyers that make a 20 percent down payment, which totals $35,200, will have monthly payments of about $698 for mortgage principal and interest on a median-priced home in the area.

5. Columbus, Ohio: With a population of 733,000, Columbus is the home of Ohio State University and the state capital. This friendly Midwestern community serves as the headquarters of 14 different Fortune 1000 companies. And while Columbus rattles with enthusiasm during Ohio State's football season, the Buckeyes aren't the only game in town. In addition to an NHL franchise and a minor league baseball team, the area has more than 100 art galleries, 20 theater companies, and 18 museums. The median home price in Columbus was nearly $150,000 in the second quarter of this year, a 10 percent increase from the same period a year earlier. After a 20 percent down payment--of $30,000--monthly payments for mortgage principal and interest on a median-priced Columbus home come to $595.

6. Phoenix, Ariz.: After appreciating substantially during the real estate boom, the median home price in the Phoenix area has dropped nearly 44 percent since 2007. Despite the recent turmoil, the area's sunny climate and abundance of outdoor activities continue to offer a wonderful quality of life for retirees or growing families. The median home price in the Phoenix area was nearly $145,000 in the second quarter of this year. After putting 20 percent--or $29,000--down, monthly payments for mortgage principal and interest on a median-priced home in the Phoenix area total about $575.

7. Columbia, S.C.: Located in the heart of South Carolina is the historic city of Columbia, the state capital. With a hot, sunny climate, the area's more than 700,000 residents can enjoy an afternoon at the Riverbanks Zoo and Garden, take their boat out on Lake Murray, or stroll through the art galleries and coffee shops in the city's entertainment districts. The median home price in Columbia was $142,000 in the second quarter of this year, up about 3 percent from the same period in 2009. Buyers that make a 20 percent down payment, which totals $28,400, will have monthly payments of about $564 for mortgage principal and interest on a median-priced home in Columbia.

8. Boise, Idaho: Boise's sunny, high-desert climate is great for checking out the 2,700 acres of parks in and around this Idaho state capital. And as the home of the Boise State University Broncos, football fans will have all the excitement they can handle on Saturdays in the fall. The median home price in the Boise area was $140,000 in the second quarter of this year, a decline of roughly 13 percent from a year earlier. After a 20 percent down payment--of $28,000--monthly payments for mortgage principal and interest on a median-priced home in Boise total about $556.

9. Pittsburgh: This once-rusting steel town has spent the past quarter-century transforming its economy into an innovative center of technology, healthcare, financial services, and education. And with short commutes, popular professional sports franchises, and all sorts of outdoor activities, Pittsburgh now considers itself "America's Most Livable City." The median home price in Pittsburgh was $127,000 in the second quarter of this year, a modest increase from the same period in 2009. Buyers who make a 20 percent down payment, which totals $25,400, will have monthly payments of about $504 for mortgage principal and interest on a median-priced home in Pittsburgh.

10. Atlanta: With a young, fast-growing population, Atlanta is an exciting city in the heart of the South. The median home price in the Atlanta area was nearly $123,000 in the second quarter of this year, up slightly from the same period a year earlier. After a 20 percent down payment--or $24,600--monthly payments for mortgage principal and interest on a median-priced Atlanta home come to $488.

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Edited September 15, 2010 by El Buscador

[Darnell 8,478]

New Kensington, PA and the surrounding area is verra cheap these days.

[^_^ 5,021]

What is so magical about the number 800?

Also, how can anyone write an article about housing affordability and not take into account taxes and insurance?

[twowls 217]

What is so magical about the number 800?

Also, how can anyone write an article about housing affordability and not take into account taxes and insurance?

That's what springs to mind for me when thinking about owning a house--what's the deal anymore with that being wiser than renting? After you map out the loan over decades, you're paying bunches more than the original ticket price, plus all the other stuff, plus your water heater just broke, etc.

It would be nice to be the master of my domain, but beyond that, it seems like it could just be a bigger headache for not much greater advantage. I really don't know though.

800 is a magical number because the 8 looks like an infinite snake monster.

[lostinblue 1,989]

Homes need to drop another 20-30 percent and will in the next few years.

http://blogs.wsj.com/economics/2010/04/24/number-of-the-week-103-months-to-clear-housing-inventory/

Number of the Week: 103 Months to Clear Housing By Mark Whitehouse

103: The number of months it would take to sell off all the foreclosed homes in banks possession, plus all the homes likely to end up there over the next couple years, at the current rate of sales.

How much should we worry about a new leg down in the housing market? If the number of foreclosed homes piling up at banks is any indication, theres ample reason for concern.

As of March, banks had an inventory of about 1.1 million foreclosed homes, up 20% from a year earlier, according to estimates from LPS Applied Analytics. Another 4.8 million mortgage holders were at least 60 days behind on their payments or in the foreclosure process, meaning their homes were well on their way to the inventory pile. That shadow inventory was up 30% from a year earlier.

Based on the rate at which banks have been selling those foreclosed homes over the past few months, all that inventory, real and shadow, would take 103 months to unload. Thats nearly nine years. Of course, banks could pick up the pace of sales, but the added supply of distressed homes would weigh heavily on prices and thus boost their losses.

The government is understandably worried about the situation, and its Home Affordable Modification Program has made an impact by helping people stay in their homes and avoid foreclosure. As people who enter the program catch up on their payments, the number of homeowners 60 or more days delinquent has fallen 9% over the past two months.

Now, though, the effect of modifications could be on the wane. According to Goldman Sachs, HAMP started less than 80,000 trial modifications in March, less than half the number in the peak month of October 2009. At the same time, a growing number of modifications are being canceled as borrowers prove unable to pay. By Goldmans count, about 68,000 were canceled in March.

All this means that little can stop banks inventory of distressed homes from growing. Too many people owe too much more on their homes than they can afford. For the housing market, that could mean a long-lasting hangover.

Edited September 15, 2010 by lostinblue

[alienlovechild 75]

It would be nice to be the master of my domain, but beyond that, it seems like it could just be a bigger headache for not much greater advantage. I really don't know though.

There are plenty of buy vs. rent calculators online to help people make a reasoned decision based on various inputs.

[lostinblue 1,989]

http://www.bloomberg.com/news/2010-09-15/u-s-home-prices-face-three-year-drop-as-inventory-surge-looms.html

A home for sale in Hammond, Louisiana. Photographer: Derick E. Hingle/Bloomberg

The slide in U.S. home prices may have another three years to go as sellers add as many as 12 million more properties to the market.

Shadow inventory -- the supply of homes in default or foreclosure that may be offered for sale -- is preventing prices from bottoming after a 28 percent plunge from 2006, according to analysts from Moody’s Analytics Inc., Fannie Mae, Morgan Stanley and Barclays Plc. Those properties are in addition to houses that are vacant or that may soon be put on the market by owners.

“Whether it’s the sidelined, shadow or current inventory, the issue is there’s more supply than demand,” said Oliver Chang, a U.S. housing strategist with Morgan Stanley in San Francisco. “Once you reach a bottom, it will take three or four years for prices to begin to rise 1 or 2 percent a year.”

Rising supply threatens to undermine government efforts to boost the housing market as homebuyers wait for better deals. Further price declines are necessary for a sustainable rebound as a stimulus-driven recovery falters, said Joshua Shapiro, chief U.S. economist of Maria Fiorini Ramirez Inc., a New York economic forecasting firm.

Sales of new and existing homes fell to the lowest levels on record in July as a federal tax credit for buyers expired and U.S. unemployment remained near a 26-year high. The median price of a previously owned home in the month was $182,600, about the level it was in 2003, the National Association of Realtors said.

Fannie Mae Forecast

Fannie Mae, the largest U.S. mortgage finance company, today lowered its forecast for home sales this year, projecting a 7 percent decline from 2009. A drop in demand after the April 30 tax credit expiration “suggests weakening home prices” in the third quarter, according to the report.

There were 4 million homes listed with brokers for sale as of July. It would take a record 12.5 months for those properties to be sold at that month’s sales pace, according to the Chicago- based Realtors group.

“The best thing that could happen is for prices to get to a level that clears the market,” said Shapiro, who predicts prices may fall another 10 percent to 15 percent. “Right now, buyers know it hasn’t hit bottom, so they’re sitting on the sidelines.”

About 2 million houses will be seized by lenders by the end of next year, according to Mark Zandi, chief economist of Moody’s Analytics in West Chester, Pennsylvania. He estimates prices will drop 5 percent by 2013.

‘Lost Decade’

After reaching bottom, prices will gain at the historic annual pace of 3 percent, requiring more than 10 years to return to their peak, he said.

“A long if not lost decade,” Zandi said.

Prices dropped in 36 states in July from a year earlier, CoreLogic Inc., a Santa Ana, California-based real estate and financial information company, reported today. Its housing index showed the biggest declines in Idaho, Alabama and Utah. Maine, South Dakota and California had the largest gains.

Working through the surplus inventory varies by markets and depends on issues such as local employment and the amount of homeowner debt, said Sam Khater, chief economist for CoreLogic. Nevada has the highest percentage of homes with mortgages more than the properties are worth, while New York state has the lowest, according to the company.

8 Million

Douglas Duncan, chief economist for Washington-based Fannie Mae, said in a Bloomberg Radio interview last week that 7 million U.S. homes are vacant or in the foreclosure process. Morgan Stanley’s Chang said the number of bank-owned and foreclosure-bound homes that have yet to hit the market is closer to 8 million.

Sandipan Deb, a residential credit strategist for Barclays in New York, said prices will drop another 8 percent -- to 2002 levels -- before beginning a recovery in 2014.

“On a national level, you have never seen a decline of this sort,” Deb said in a telephone interview. “I would caveat that by saying you also have not seen an increase on a national level like we saw from 2002 or 2003 to 2006.”

In addition to the as many as 8 million properties vacant or in foreclosure, owners of another 3.8 million homes -- 5 percent of U.S. households -- said they are “very likely” to put their properties on the market within six months if there is improvement, according to a July survey by Seattle-based Zillow.

“This has the potential to create a sawtooth pattern along the bottom,” Stan Humphries, Zillow’s chief economist, said in a telephone interview. “Homes begin to sell and a few sidelined sellers rush into the marketplace and flood the marketplace.”

Gains Versus Inflation

If the market doesn’t fall to its natural bottom, price gains in the next five to 10 years won’t keep pace with inflation as the difference is made up “on the backend,” said Barry Ritholtz, chief executive officer of FusionIQ, a New York research company. Price increases that fail to at least match inflation are the same as reductions in value, Ritholtz said.

The Obama administration’s effort to help mortgage holders, the Home Affordable Modification Program, or HAMP, is another source of future inventory as owners with new loan terms re- default, Ritholtz said. About half of the modifications done in 2009 were behind in payments by the first quarter of 2010, according to the Treasury Department.

‘Day of Reckoning’

“The belief has been: if we stimulate sales with a tax credit and delay foreclosures with modifications, the market would stabilize,” said Ritholtz, author of “Bailout Nation.” “We’re just putting off the day of reckoning and drawing out the pain by not letting the housing market hit its bottom.”

Government policy contributed to a recent stabilization in prices that may have been an “illusion,” said Zach Pandl, an economist at Nomura Securities International Inc. The S&P/Case- Shiller index of home prices in 20 U.S. cities rose 4.2 percent in June from a year earlier. The measure is a three-month moving average, which means data in the month were still influenced by transactions that may have benefited from the tax incentive.

Even if modifications fail, keeping foreclosures off the market is worth the risk of a delayed recovery, Pandl said.

“It’s too painful and too damaging to let it happen all at once,” Pandl said from New York.

Owners of about 11 million homes, or 23 percent of households with a mortgage, owed more than their property was worth as of June 30, according to CoreLogic. Another 2.4 million borrowers had less than 5 percent equity in their houses and probably would lose money on a sale after paying broker fees and closing costs, CoreLogic said Aug 25.

Nevada, New York

In Nevada, 68 percent of homes were underwater in July, with mortgage loans statewide totaling 120 percent of home values, according to CoreLogic. Only 7.1 percent of properties in New York state were underwater, with the total loan-to-value equivalent of 50 percent, the company said.

Brandi Miner, director of marketing for the Georgia Association of Realtors, is holding back on selling her one- bedroom condominium in Atlanta’s Buckhead district because she has an underwater mortgage. She paid $155,000 for the property in 2005.

“I’m stuck,” Miner said. “I thought it was a stepping stone to a house.”

Miner pays about $1,100 a month for her mortgage plus $225 in condo dues, a higher price than she would spend for a three- bedroom house in a good Atlanta-area neighborhood at today’s prices, she said. Selling now would cost her $10,000 to $15,000, Miner estimated.

“I’m not $200,000 in the hole, thank God,” she said. “But the quarter of the country that’s underwater -- that’s me.”

Positive Equity

Detroit, Las Vegas and Fort Myers, Florida, will take until at least 2020 to return homeowners to positive equity, CoreLogic said in a March report that compared prices in 10 metro areas. Atlanta, Dallas and California’s Riverside and San Bernardino counties will need until 2016. The Washington, D.C., area will take the least amount of time, with negative equity disappearing around 2015, CoreLogic said.

The slide in values and record-low interest rates may offer some bargains for property hunters. Prices have returned to historically affordable levels, said Karl Case, professor emeritus of economics at Wellesley College in Wellesley, Massachusetts, and co-creator of the S&P/Case-Shiller index. He estimates a bottom for prices in six months.

“It doesn’t take a tremendous number of people to turn the housing market, because only about 5 percent of the stock trades in a given year,” Case said in a telephone interview. “There’s still a lot of people who are employed, many of whom have been looking for the opportunity to buy.”

Cooperstown A-Frame

Case is an example of a homeowner waiting to sell because of low demand. He’s seeking to sell the A-frame on 15 acres near Cooperstown, New York, that he bought for $190,000 in 2005.

“I want to keep it if I can’t get what I want,” he said. “It’s a terrific little getaway and I’m not going to give it away.”

Some indicators show the real estate market has begun to turn a corner. Pending sales of existing houses increased 5.2 percent from June to July, the National Association of Realtors reported Sept. 2. Economists had estimated a 1 percent decline, according to the median of 37 forecasts in a Bloomberg survey.

“The market is starting to show some signs of stabilization,” Nicolas Retsinas, director emeritus of Harvard University’s Joint Center for Housing Studies, said during an Aug. 31 interview on Bloomberg Television’s “InsideTrack.” “But a robust recovery is a long time away.”

Fewer Foreclosures

The number of U.S. homes in default or foreclosure fell to 7.04 million as of July 31 from a high of 8.12 million in January, Lender Processing Services Inc., a Jacksonville, Florida-based mortgage servicing company, reported Sept. 2.

Defaulted mortgages as of July took an average 469 days to reach foreclosure, up from 319 days in January 2009. That’s an indication lenders -- with the help of the government loan modification programs -- are delaying resolutions and preventing the market from flooding with distressed properties, said Herb Blecher, senior vice president for analytics at LPS.

“The efforts to date have been worthwhile,” Blecher said in a telephone interview from Denver. “They both helped borrowers stay in their homes and kept that supply of distressed properties on the market somewhat limited.”

To contact the reporter on this story: John Gittelsohn in New York at johngitt@bloomberg.net; Kathleen M. Howley in Boston at kmhowley@bloomberg.net.

[mawilson 2,133]

What is so magical about the number 800?

You could probably suck that much from the government's teat.

[Saddle Bronc 124]

What is so magical about the number 800?

Also, how can anyone write an article about housing affordability and not take into account taxes and insurance?

Possibly, it just happens to be roughly the US average rent for a 2-BR apartment.

[fozzie 41]

If only I could pursuade my wife to leave NYC!!!! My 1 BR 650sq ft apartment costs twice that.:ranting: :ranting:

[^_^ 5,021]

$1300 for a 650 sq feet apt? Well look at the bright side, you get to live in NYC.

[spookyturtle 9,466]

What about Detroit? You could probably buy the city for $800.

[fozzie 41]

$1300 for a 650 sq feet apt? Well look at the bright side, you get to live in NYC.

...and ours is a relatively low rent! Some 1BR apts inthe city cost twice what I pay.

[mawilson 2,133]

...and ours is a relatively low rent! Some 1BR apts inthe city cost twice what I pay.

I think that's what he meant. $1,300 is nothing in NYC.

[^_^ 5,021]

As a point of reference fozzie - I own about 40 miles southwest of Manhattan. 1500 sq feet (not counting the basement and garage) and I pay nearly 2K. It sounds to me like you have a great deal. After all, you live in the city. Where I live, if you wanna have fun ya gotta go to the Cheesecake Factory or a bowling alley or watch second rate comedians at a new brunswick comedy club. Or maybe schlep an hour out to the city to hang out with you folks who look down their noses at us bridge n tunnel folk

Edited September 16, 2010 by Legacy member