Data scientists from Realtor.com have recently shared their findings on where to get the most of your money in buying affordable houses.
Methodology:
Realtor.com's data scientists determined the "maximum affordable price" for each housing market by using various factors such as "2015 median incomes, median home values, and fair market rental data from the U.S. Department of Housing and Urban Development." The data experts took into account the current rates for the 30-year home loans, with 20% down payment for the house. They also made sure that homeownership costs like mortgage, insurance and taxes would just fall within or below 28% of the buyer's income. After getting the "maximum affordable price," the data experts noted the available homes for each area falling below this price.
The area with the highest number is deemed most affordable, and a good choice for buyers to find bargains.
Results:
10 Cities Buyers Will Find Bargains
1. Atlanta-Sandy Springs-Roswell, GA
2. Chicago-Naperville-Elgin, IL-IN-WI
3. Philadelphia-Camden-Wilmington, PA-NJ-DE-MD
4. Detroit-Warren-Dearborn, MI
5. Tampa-St. Petersburg-Clearwater, FL
6. St. Louis, MO-IL
7. Pittsburgh, PA
8. Cincinnati, OH-KY-IN
9. Indianapolis-Carmel-Anderson, IN
10. Virginia Beach-Norfolk-Newport News, VA-NC
As seen from the list, Atlanta is on the top spot of the places where buying is the logical choice over renting.
"Atlanta has always been more affordable, despite having seen very strong population growth for decades. There's no natural barrier like an ocean or mountains or desert that limits development-so new construction has kept supply in balance with demand," said Realtor.com's chief economist, Jonathan Smoke.
Smoke added. "Atlanta's economy, which is more dependent on housing and new construction than other areas of the country, suffered more in the recent recession.The market didn't really start to recover substantially until last year. So it isn't surprising to see it at the top of the list."
With the current rates still near historic lows, people in these areas could grab the opportunity before rates rise again. Mortgage rates increased slightly this week as reported by Los Angeles Times.
On the flip side, here are the places where renters may continue to rent as it could be the wiser decision for you, according to Realtor.com:
10 Cities That are Best Choice For Renters
1. Los Alamos, NM
2. Columbus, NE
3. Summit Park, UT
4. Spirit Lake, IA
5. Kearney, NE
6. Bismarck, ND
7. Cedar Rapids, IA
8. Grand Island, NE
9. Des Moines-West Des Moines, IA
10. Madison, WI
However, in the long run, renting is also not the better choice for you.
"Renting is not a wise long-term financial choice if you intend to live in a market beyond a break-even amount of time and you can afford to buy," Realtor.com chief economist advised.
This is in accordance with what Zillow chief economist, Stan Humphries told CNBC about this breakeven horizon. According to him, the average breakeven horizon point, nationally, is 2.3 years. "Breakeven Horizon" is when the renters must decide to rent or purchase because this is when the accumulated costs of renting exceed those of buying, as explained on CNBC. However, it still depends where you reside. Check the Zillow study to be your guide.
