Buying a house today is no small task, as housing prices continue to climb and inventory remains low. For many people, their buying power is being eroded, making them wonder if it’s even possible to buy a home within their budget.
Most people buy a payment — that is to say, they buy a house based on the monthly payment, not the overall cost of the home — which makes it even harder in today’s market with mortgage interest rates up significantly over just a year or two ago. So, what can you buy for $1,500 a month? And is it even something you’d want?
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Where You Get the Most Bang for Your Buck
According to a recent report from Realtor.com, the best home values are found throughout the flyover states, primarily the Midwest and some parts of the south. Michigan, Ohio, Illinois, New York, Indiana, Missouri, Oklahoma, Arkansas, Wisconsin and Mississippi have cities that take the top awards for most homes priced below $250,000.
If you bring the national average down payment of 6% to closing and have a 7.69% rate on a 30-year fixed mortgage, that’s just shy of $1,700 a month in principal and interest.
What does $1,500 buy with those same terms? About $225,000 worth of house, give or take. So the same low-cost areas are just as likely to be home to your future affordable house, if you’re lucky enough to be nearby or have a great telecommuting job you can take with you.
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What Does a $1,500 House Look Like?
Although finding a house for $1,500 per month can be tricky in a lot of places, in others, it’s a perfectly reasonable price point that will give you plenty of options. For example, in northwest Indiana, you can easily afford a three-bedroom, one-bath home.
“A home between $200,000 and $225,000 will have three bedrooms and one bathroom, about 1,500 square feet of finished living space, a lot size of about a quarter of an acre, and is going to be a little bit older,” says Chuck Vander Stelt, real estate agent with Listing Leaders and operator of real estate website Quadwalls.com in Valparaiso, Indiana. “It probably was built in the 1960s or 1970s, it’s probably a ranch, it might have a basement, and most of the time it will have at least a one-car garage, which might be attached or detached.”
Surprisingly, the house you can get in Green Bay, Wisconsin, isn’t substantially different.
“A house that you could buy for about $1,500 per month in this market has three beds, one bath — maybe one and a half, if somebody was lucky enough to have someone that was handy and install one in the basement — and it’s often a single-story home with a single-car garage,” says Alex Young, realtor broker with The Bow Tie Group at Keller Williams in Green Bay. “You’ve kind of got everything from about 1890 to about 1960 in that range, so there are a lot of different kinds of homes. Some are ready to move into, others will need substantial updating.”
Types of Cities Where $1,500 Homes are Possible
If the houses you can get for $1,500 per month are pretty reasonable, maybe the cities themselves are why they’re not more expensive. After all, you’ll never be able to touch a house for $1,500 per month in a popular metropolis like New York City or San Francisco.
Most of the cities where housing is in this price range are small cities with a small-town feel where prices simply started very low. Even with massive appreciation, a house that’s starting at half the price of a house in a bigger city elsewhere can only climb so high in value. For example, Springfield, Missouri, was a hidden gem until relatively recently, according to real estate experts. Springfield is still a gem, but it’s no longer hidden. It earned the No. 3 spot in U.S. News and World Report’s 2024 Most Affordable Places to Retire annual rankings.
In The Queen City of the Ozarks, you can buy a lot of home for $1,500 per month, from existing homes over 2,000 square feet to new construction homes around 1,300 square feet, both with at least three bedrooms.
“Being right in the center of the country, we have access to everything,” says Laura Carroll Duckworth, real estate agent with Flat Fee Redefined brokered by eXp Realty LLC in Springfield. “Our location is why we were chosen for the new distribution system for Amazon. We also have an airport that flies directly to 15 cities, so you can get anywhere from Springfield. In addition, we’re home to colleges like Drury University, Missouri State University, Evangel University and Ozarks Technical Community College, as well as the headquarters for Bass Pro Shops and O’Reilly Auto Parts. There’s a lot of opportunity here, as well as a housing market that’s a really good value.”
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Advice for $1,500 Home Buyers
Just because you can still find $1,500 per month homes in some markets, it’s not necessarily going to be easy to buy one. You’re not the only person shopping for a deal right now. As long as inventory remains low and interest rates are elevated, affordability is going to be a problem, as will competition.
“I usually start with buyers by figuring out why they want to buy in the first place,” Young says. “Because if it’s just because they think owning a home will be cool, they’re probably going to get eaten alive by everybody else that has a very strong motivation or a larger life experience, whether it’s birth or death or divorce or marriage or something to that effect. Without that strong motivation, it can be very taxing mentally and emotionally in this market.”
Another key piece of advice from real estate agents in the field is to not sit on this chance to buy during the relative lull compared with the last few years. Even though it’s still quite competitive, it’s nothing like it was, they say, and the time to secure your home is now.
“Some people are saying they’re going to wait for rates to drop,” says Duckworth. “And to me, that is the biggest mistake, because rates will drop eventually and you can refinance your house then. But, once rates do drop, because of this inventory crisis, we’re going to have the crazy 2020 to 2022 markets all over again. If you’re thinking that your monthly payment is going to be less because of your lower rate if you wait to buy, you’re still going to end up paying so much more for your actual house because of bidding wars.”
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What Kind of House Can You Buy for $1,500 a Month? originally appeared on usnews.com
