Not many lists of housing market hotspots include Bloomington, Illinois; Bismarck, North Dakota; and Akron, Ohio, in the upper echelon. But this one does.
Rent Café has produced a list of the 20 metropolitan statistical areas (MSAs) in the United States where renters can most quickly save up the down payment for a home of their own. It’s dominated by the Midwest, with 14 on the list, including eight of the top 10.
The number crunchers parsed data from the Bureau of Labor Statistics, U.S. Census Bureau, Economic Policy Institute, and Zillow to determine how long it would take a two-person family to set aside the down payment on what is often one’s first real estate investment: a starter home.
Image source: Getty Images.
The researchers said they analyzed 174 metro areas nationwide and found 64 metro areas where an average two-person family can save for a 20% down payment on a starter home in less than 10 years. That 20% is the point at which property mortgage insurance typically goes away, although down payments, of course, can be less. FHA loans, for instance, only require 3.5% for a down payment.
Four of the top 20 are in Illinois, with Bloomington at the top. Based on a typical starter-home price of $105,249 and prevailing local wages and cost of living, it would take 12 months to come up with that 20% down payment. The state capital of Springfield is second, at 15 months. Champaign-Urbana is number 13, at 32 months, and number 19 is Decatur, at 38 months.
There’s a wide range of starter-home prices. Decatur comes in the cheapest, at $46,696. The highest is Washington-Arlington-Alexandria (DC-VA-MD-WV), at $341,444. Below is the entire list and some of the criteria. The entire list along with more details is here.
|
Rank/Metro Statistical Area (MSA) |
Starter Price |
Time to Reach 20% |
|---|---|---|
|
1. Bloomington, Illinois |
$105,249 |
12 months |
|
2. Springfield, Illinois |
$81,901 |
15 months |
|
3. Cedar Rapids, Iowa |
$117,181 |
21 months |
|
4. Trenton/Princeton, New Jersey |
$164,490 |
22 months |
|
5. Ann Arbor, Michigan |
$228,996 |
28 months |
|
6. Bismarck, North Dakota |
$212,918 |
28 months |
|
7. Bridgeport-Stamford-Norwalk, Connecticut |
$303,031 |
29 months |
|
8. Fargo, North Dakota/Minnesota |
$187,766 |
29 months |
|
9. Madison, Wisconsin |
$242,538 |
30 months |
|
10. Des Moines-West Des Moines, Iowa |
$154,720 |
31 months |
|
11. Hartford-East Hartford-Middletown, Connecticut |
$198,000 |
32 months |
|
12. Fond du Lac, Wisconsin |
$122,982 |
32 months |
|
13. Champaign-Urbana, Illinois |
$102,166 |
32 months |
|
14. Baltimore-Columbia-Towson, Maryland |
$211,039 |
33 months |
|
15. Waterloo-Cedar Falls, Iowa |
$91,403 |
34 months |
|
16. Washington-Arlington-Alexandria, DC-VA-MD-WV |
$341,444 |
34 months |
|
17. Cincinnati, Ohio-Kentucky-Indiana |
$151,092 |
35 months |
|
18. Akron, Ohio |
$104,637 |
37 months |
|
19. Decatur, Illinois |
$46,696 |
38 months |
|
20. Naples-Marco Island, Florida |
$262,944 |
39 months |
Real estate, and the economy it lives in, is all local
That D.C.-area price might sound high, but the median price in that market is about $500,000, according to the latest figures from the Federal Reserve Economic Data (FRED) kept by the St. Louis Fed, which places the national median sales price at $408,100.
The variations on the list also reflects the higher wages and cost of living in those pricier environs -- longtime retiree hotspot Naples, Florida, is on the list, too -- compared to those small towns in the Midwest also on this list.
So, what does this mean to residential real estate investors? Well, affordability is already an issue in many areas, a concern that’s likely to grow along with inflation and interest rates. These are places where affordability may not be as much of an issue, making them more attractive to remote workers looking to move out of high-priced urban areas as that surge sparked by the pandemic continues. Savvy buyers can get ahead of the curve by finding good deals now.
