The U.S. housing market is facing an affordability crisis. The combination of high home prices, rising mortgage rates, and decreased spending power has driven housing affordability to its lowest level in decades. As such, it is difficult for investors and homebuyers alike to identify cities where they can afford to buy property.
But, there are still great opportunities to buy real estate, even on a budget. I’ve done the research and have identified the eight most affordable markets for real estate investors. Below, I’ll explain how we arrived at the current situation, my criteria for selecting these markets, and then give you some data about the cities. Check out the list below and determine if any of these cities fit your investing goals.
How We Got Here
At this point, everyone knows what’s happened to the housing market since the beginning of 2020: it went up a lot. Driven by strong demographic demand, remote work, ultra low interest rates, and several other factors, the housing market went on an incredible run of appreciation from the beginning of 2020 to the middle of 2022.
Since the summer of 2022, prices have started to come down as mortgage rates have risen, but the appreciation we’ve seen is still staggering. From December 2019 to December 2022, prices grew 31% on a national level. In certain markets, prices have gone up even further. Austin, Texas, for example, has gone up 43% in that timeframe, despite seeing price drops over the second half of 2022.
The reason prices started to drop in the middle of 2022 is because affordability eroded. Despite rapidly rising prices, affordability in the housing market was still strong for years due to low mortgage rates. But of course, when rates started to rise, reality started to set in. The combination of high rates and super-high home prices eroded affordability to the lowest point in…