The Starter Home. It’s the home (or condo) Americans aim to buy to get out of the rental market and dip their toes into home ownership before eventually upgrading to their permanent home.
Yet according to a study by Point2, it appears that “the once ubiquitous entry-level house is becoming the stuff of mythology.”
In the study, Point2 looked at homes in the bottom third of all available properties in that market for 50 American cities, based on Zillow data. Then, using the personal finance rule that your mortgage payment should not exceed 30% of your gross monthly income, Point2 rated the affordability of entry-level homes in each city.
So if you’re looking for a starter home, here are four places Point2 found that offer the best bang for your buck.
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Starter homes in Detroit came in at a median price of $48,129, making them more affordable for local residents and renters.
Here, the median income of renters came in at $25,004. Meanwhile, the income that could afford a starter home would be just $19,103.
Although Tulsa, Oklahoma, ranked second on the list, home prices have risen significantly compared to the Motor City. Here, the average starter home came in at $95,481, nearly double Detroit prices.
However, renters earn an average of $10,000 more than their Detroit counterparts, who have a median income of $35,039. And that’s more than enough to get into the market — they’ll need just $29,524 to afford a starter home.
Memphis, Tennessee starts out a little less affordable, with starter homes costing less than Tulsa, but Memphis also has lower salaries than Tulsans.
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Here, the average starter home costs $87,714, and renters make an average of $30,093. However, renters would only need to earn $27,966 to afford a starter home.
Finally, Oklahoma City, Oklahoma, really starts to heat up the list, surpassing the $100,000 mark.
The median price of a starter home here is $126,442, with a renter median of $37,211. This is only At $37,071, that’s what they’d need to afford a starter home. That’s really pushing the term “affordability” to its upper limit.
Where to avoid
While these were the most affordable places to find a starter home, the list also identifies places where aspiring homeowners are likely to be left out in the cold. The top two here are no surprise.
And really, if the most affordable homes still come in at over $1 million, can you really call them starter homes?
So, if you’re looking to upscale a house in Los Angeles or set up home to live the glamorous New York City life, your $40,000 salary won’t do much for you.
Los Angeles is officially the most affordable place to live, with renters earning an average of $49,568 per year and needing $166,937 annually to afford a home.
The situation was slightly better in New York City, where renters earned an average of $52,724 per year. However, they would need to make at least $156,343 to afford a starter home in the Big Apple.
Despite New York, California cities make up eight of the top 15 most affordable places to live. So if you’re looking for a starter home, it looks like you’ll only be dreaming in California.
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This article provides information only and should not be considered as advice. It is provided without warranty of any kind.