Alicia Williams bought her first home in St. Louis this December after renting for more than 20 years.
A city native, Williams had never considered buying a home until she used a mortgage calculator and realized her monthly payments would be roughly the same as renting.
“Why should I pay someone else's property taxes when I can do it myself?” Williams, a Gen Xer who works on an auto assembly line, told Yahoo Finance. “So I took the plunge.”
As home prices soar, the Midwest offers a rare opportunity for homebuyers. The region has the most affordable housing in the United States, and cities in the region have topped recent rankings of the best places to buy a home thanks to relatively affordable housing costs, vibrant local economies and friendly communities.
“The Midwest stands out as an attractive region for potential homebuyers because of the presence and availability of affordable housing in the Midwest and the lack of affordable housing in most other regions,” Skylar Olsen, chief economist at Zillow, told Yahoo Finance. “A high number of affordable listings and low potential competition for those properties is why Midwestern markets stand out in this ranking.”
St. Louis topped Zillow's list of “Best Cities for First-Time Home Buyers,” followed by four other Midwestern cities, and more than half of Realtor.com's top housing markets are also located in the Midwest, according to the site's spring market rankings.
read more: First-time home buyers in 2024: What you need to know
Affordable prices for rental and purchase
Williams bought the four-bedroom, two-bathroom home for about $135,000, with a monthly payment of about $1,200 on a 30-year mortgage at 6.4 percent.
The Midwest has the lowest mortgage payments in the country, at $1,553 compared to the national average of $2,100.
Interest rates are more than double what they were three years ago, but Williams sees the fluctuations as part of the process.
“if [rates] “If they're going to go down, they're not going to go down much,” Williams said. “If they're going to go up, it might be better to take the plunge and buy a house now.”
Williams spends about 17% of her income on her monthly mortgage payment, and she's in just the right spot. A good guideline is to spend no more than 28% of your gross monthly income on housing costs.
“I don't get stressed or overwhelmed. [making] “It's a mortgage payment,” she says, “and I pay it two to three weeks before it's due.”
Midwestern homeowners have the lowest mortgage burden in the United States, with monthly payments on average less than one-fifth of their salary.
In the Midwest, homeowners are spending less than 19% of their income on mortgage costs, according to the National Association of Realtors' March Home Affordability Index. By comparison, homeowners in the West are paying 35% of their income on their mortgage, and 25% in the Northeast and South.
“If I went to another state, like Texas, with the salary I'm making here, I probably wouldn't be able to buy a house. Or [have bought] “We have a home, but we don't have a home,” Williams said.
Relatively low rent prices in St. Louis also helped Williams achieve homeownership: Her rent was about $1,150, less than 15% of her monthly income. The average rent in the Midwest is about $1,460, making it one of the cheapest places to rent in the United States.
Housing costs in the Midwest have risen over the past few years, but at a much slower rate than in other parts of the country.
“The Midwest rode the pandemic-era wave of rapid price growth, but it came later and less pronounced than other parts of the country,” Orphée Divongui, senior economist at Zillow, told Yahoo Finance. “Home prices in Midwestern cities also started at lower bases, so even with the big price increases, much of the housing stock is still affordable.”
read more: Why are home prices so high?
The Midwest is growing in popularity
Home prices in St. Louis have remained relatively stable and affordable since the beginning of the year, with the median home price hovering around the $200,000 mark. Nearly all of the Midwest cities in the top 10 housing markets ranked by Realtor.com have median home prices below the national average of $425,000, ranging from $212,500 to $525,000.
Homebuilders are also feeling the positive effects of buyer demand in the Midwest, the only U.S. region where confidence in homebuilding rose in May, according to the National Association of Home Builders. New housing starts rose about 20% in April from the previous month and about 4% from a year ago, according to Census Bureau data.
Tina Siebert, a St. Louis-based real estate agent with Williams, told Yahoo Finance that popular homes receive multiple bids.
“We feel like we don't have the inventory we need to get all of our customers to buy homes,” Seibert said. “If the homes are priced within that range, you're going to see a lot of transactions.”
Lack of inventory and rising interest rates are no longer a concern for Williams, who has settled into her home on a cul-de-sac.
“Every time I open the door I still can't believe it,” she said.
Rebecca Chen is a reporter for Yahoo Finance and previously worked as a certified public accountant (CPA) in investment tax.
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