The Cheapest States to Buy and Own a House

Homebuyers often talk about shopping for and finding their dream house, or at least one close to it. This is especially true for first time home buyers. One of the main attributes of this home is a low purchase price, or at least a lower price than other houses they are considering. But what makes a house cheap? Is it the cost to buy it? The cost to live in that area? Or how much your family can earn there? The answer: It is all three. The house you can buy for the least money, and maintain on your salary while also paying living expenses and saving extra money, is the cheapest house because it will pay off in the long run.

The definition of cheap comes down to defining a good deal. If you buy cheap appliances, they are likely to break quickly and need more frequent replacing. Over time, those cheap appliances become very expensive. Warren Buffett, a billionaire and one of the world’s richest men, is known as the Oracle of Omaha for his business wisdom. One thing he talks about frequently is that what matters most is not the revenues a business brings in, but what it costs to generate those revenues. He also knows a lot about affordable housing. Buffett bought his house in Omaha for $31,500 in 1958 and still lives there, though he has made additions.

At 6,570 square feet, Buffett’s home it is not a bungalow, but its current value (over $600,000) is far below that of a mansion. He told Berkshire shareholders in 2010 that “a house can be a nightmare if the buyer’s eyes are bigger than his wallet.” On the opposite end of that spectrum, the cheapest states to live in aren’t very appealing if cost of living is high relative to median household income as your quality of life will be lower. A better measure than cost is affordability. The places in the United States with the most affordable housing balance lower sale prices, lower cost of living, and relatively higher median household income.

Most Millennials looking at this list will not like what they see. A list of the hippest places to live would include cities and towns on either coast in places like Massachusetts, California and New York; these are housing markets where the cost of living, salaries and home prices are all very high, as are property tax rates. But this is also not a list of the cheapest places to buy a house in America. That list would focus more on Southern states where home sale prices are very low, but the cost of living and salaries are also low.

This list steers clear of the coasts, but includes many midwestern states with busy metro areas. In these states, home prices are well below $310,900, the median home sale price nationally. However, housing in the metro areas is significantly higher than the state median, but so too are salaries.

Methodology

To determine the cheapest places to buy and own a house in the United States, we looked at three measures: second quarter 2019 cost of living index (from the Council for Community & Economic Research), August 2019 median home sale price (from Zillow) and 2018 median household income (from the U.S. Census). In places where median home sale price was not available, we used 2018 median listing price.

All three measures were weighted equally. Each were ranked on a scale of 1 to 50, with lowest sale prices, lowest cost of living and highest income earning the lowest scores. Overall, the lowest scores made the top of the list.

Notes: We did not use property tax rates as a main measure because property taxes within many states varies significantly based on location and house size. For example, some people are willing to pay higher property tax rates for a smaller house in a town with good schools, while others will value a bigger house and lower property tax rates. Property taxes are considered as part of the cost of living index. (along with other housing costs, groceries, utilities, transportation and health care.)

The 12 Cheapest Places to Buy and Own a House

1 Michigan

2 Iowa

3 Oklahoma

4 Ohio

5 (Tie) Indiana and Kansas

6 Missouri

7 (Tie) Arkansas and Illinois

8 (Tie) Alabama and Nebraska

9 Pennsylvania

1: Michigan

Median Home Sale Price: $151, 500

Rank for price: 6

Median Household Income: $56,697

Rank for Income: 32

Cost of Living Index: 89.5

Rank for Cost of Living: 7

Major metropolitan areas: Ann Arbor, Detroit, Grand Rapids, Lansing

2: Iowa

Median Home Sale Price: $157,200

Rank for price: 7

Median Household Income: $59,955

Rank for Income: 26

Cost of Living Index: 92

Rank for Cost of Living: 14

Major metropolitan areas: Cedar Rapids, Des Moines, Davenport

3: Oklahoma

Median Home Sale Price: $148,000

Rank for price: 2

Median Household Income: $51,924

Rank for Income: 44

Cost of Living Index: 87.2

Rank for Cost of Living: 2

Major metropolitan areas: Oklahoma City, Tulsa

4: Ohio

Median Home Sale Price: $145,100

Rank for price: 1

Median Household Income: $56,111

Rank for Income: 34

Cost of Living Index: 92.2

Rank for Cost of Living: 16

Major metropolitan areas: Cincinnati, Columbus, Dayton and Akron

5: Indiana (Tie)

Median Home Sale Price: $166,700

Rank for price: 9

Median Household Income: $55,746

Rank for Income: 36

Cost of Living Index: 90.5

Rank for Cost of Living: 9

Major metropolitan areas: Fort Wayne, Indianapolis

5: Kansas (Tie)

Median Home Sale Price: $182,100

Rank for price: 15

Median Household Income: $58,218

Rank for Income: 31

Cost of Living Index: 89.6

Rank for Cost of Living: 8

Major metropolitan areas: Topeka, Wichita

6: Missouri

Median Home Sale Price: $172,400

Rank for price: 11

Median Household Income: $54,478

Rank for Income: 40

Cost of Living Index: 88.3

Rank for Cost of Living: 4

Major metropolitan areas: Columbia, Springfield, St. Louis

7: Arkansas (Tie)

Median Home Sale Price: $150,400

Rank for price: 4

Median Household Income: $47,062

Rank for Income: 49

Cost of Living Index: 87.1

Rank for Cost of Living: 3

Major metropolitan areas: Little Rock

7: Illinois (Tie)

Median Home Sale Price: $195,300

Rank for price: 19

Median Household Income: $65,030

Rank for Income: 16

Cost of Living Index: 95

Rank for Cost of Living: 21

Major metropolitan areas: Chicago, Rockford, Peoria, Springfield

8: Alabama (Tie)

Median Home Sale Price: $150,700

Rank for price: 5

Median Household Income: $49,861

Rank for Income: 46

Cost of Living Index: 89.2

Rank for Cost of Living: 6

Major metropolitan areas: Birmingham, Huntsville, Mobile, Montgomery

8: Nebraska (Tie)

Median Home Sale Price: $178,600

Rank for price: 13

Median Household Income: $59,566

Rank for Income: 17

Cost of Living Index: 92.3

Rank for Cost of Living: 27

Major metropolitan areas: Lincoln, Omaha

9: Pennsylvania

Median Home Sale Price: $171,500

Rank for price: 10

Median Household Income: $60,905

Rank for Income: 22

Cost of Living Index: 98.8

Rank for Cost of Living: 28

Major metropolitan areas: Allentown, Philadelphia, Pittsburgh, Reading

The 12 Most Expensive States to Buy and Own a House

When cost of living and income are factored in with housing prices, the most affordable states to own a house often become a matter of geography. Just as the Midwest ranks high in affordability due to lower median home prices and cost of living, many Western states have low median household income and higher cost of living, making them a more expensive place to live.

1 Montana

2 Oregon

3 Hawaii and Nevada (Tie)

4 California and New York (Tie)

5 Massachusetts

6 Vermont

7 Alaska

8 Washington

9 Colorado and Idaho (Tie)

A house is one of the most expensive purchases people make in their lives. For those who have the ability to choose what state they will live in, there are many factors to consider beyond affordability including job prospects, proximity to family and preferred weekend activities. If you are considering buying a house and need advice on any aspect of the home ownership journey, give us a call.

Own up primarily works in the mortgage business, using technology to simplify the mortgage financing process. Unlike traditional lenders, our interests are aligned with yours**,** so we work to get you a better rate on your mortgage.

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