After more than two decades of renting, Alicia Williams bought her first home in St. Louis in December.
Williams, a city native, hadn’t considered homeownership until she played with a mortgage calculator and realized her monthly payments could be about what she paid in rent.
“Why am I paying someone’s property taxes here when I could do this myself?” Williams, a Gen
With home prices soaring, the Midwest offers a rare opportunity for homebuyers. The region is the most affordable region in the US, and its cities dominate recent rankings of the best places to buy a home thanks to their relatively affordable housing costs, thriving local economies, and friendly communities.
“The Midwest stands out as an attractive region for aspiring homeowners because affordable housing is plentiful and accessible there, and scarce almost everywhere else,” Skylar Olsen, Zillow’s chief economist, told Yahoo Finance. “A greater number of affordable listings and less potential competition over those listings allow the Midwest markets to shine in these rankings.”
St. Louis topped Zillow’s list of the best cities for first-time homebuyers, along with four other cities in the Midwest. More than half of Realtor.com’s top housing markets are also in the Midwest, according to the site’s spring market rankings.
Read more: First-time home buyers in 2024: what you need to know
Affordability from renting to buying
Williams bought her four-bedroom, two-bathroom home for about $135,000. The monthly payment on her 30-year, 6.4% mortgage is about $1,200.
The Midwest has the lowest mortgage payments in the US: $1,553 versus the national median of $2,100.
While interest rates have more than doubled from three years ago, Williams sees volatility as part of the process.
“Like [rates] down, they won’t go down that much,” Williams said. “If they go up, I might as well go ahead and buy a house now.”
Williams spends about 17% of her income on her monthly mortgage payments. She’s in the right place: a good guideline is to spend 28% or less of your monthly gross income on housing costs.
‘I never feel stressed or overwhelmed [making] mortgage payments,” she said. “And I pay two to three weeks before the due date.”
Homeowners in the U.S. Midwest have the fewest mortgage payments and spend, on average, less than a fifth of their paychecks on monthly payments.
According to the National Association of Realtors’ March affordability index, the share of income spent on mortgage costs was less than 19% in the Midwest. By comparison, homeowners in the West pay 35% of their income on their mortgage and 25% in the Northeast and South.
“If it was the wages I make here and go to another state, like Texas, for example… I probably wouldn’t have been able to buy a house. Otherwise I would.” [have bought] a house, but was housing poor,” Williams said.
Paying relatively cheaper rent in St. Louis also helped Williams transition to homeownership. Her rent was about $1,150, which amounts to less than 15% of her monthly income. The average asking rent in the Midwest is about $1,460, making it the cheapest rental region in America.
Housing costs in the Midwest have been rising in recent years, but at a much slower pace than the rest of the country.
“The Midwest did experience the pandemic-era wave of extreme price growth, but it was later and less pronounced than in other parts of the country,” Zillow senior economist Orphe Divounguy told Yahoo Finance. “Home prices in the Midwestern metros also started from a lower base level, so even with massive appreciation, much of the housing stock is still affordable.”
Read more: Why are house prices so high?
Midwest is gaining popularity
Home prices in St. Louis have remained relatively flat and affordable since the start of the year, with the median home price hovering around $200,000. Nearly all of the Midwest cities that rank in the top 10 of Realtor.com’s rankings for the best housing markets have average prices lower than the national average of $425,000 – they range between $212,500 and $525,000.
Homebuilders are also feeling good about buyer demand in the Midwest markets. This was the only U.S. region where construction confidence grew in May, according to the National Association of Homebuilders. The number of new homes rose nearly 20% monthly and nearly 4% annually in April, according to Census Bureau data.
Tina Siebert, Williams’ agent based in St. Louis, told Yahoo Finance that she is seeing multiple offers on popular homes.
“I just don’t feel like the inventory is getting to the point where we need to be to get all of our customers into homes,” Siebert said. “If you have a house that’s priced within the range, you’re going to get a lot of action on it.”
Inventory shortages and rising interest rates are no longer Williams’ concerns. She has settled in her house on a cul-de-sac.
“Every time I open the door,” she said, “I still can’t believe it.”
Rebecca Chen is a reporter for Yahoo Finance and previously worked as an investment tax certified public accountant (CPA).
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