America's 5 Most-Affordable Housing Markets

BOSTON (TheStreet) -- Attention cheapskates -- here's a look at U.S. five cities you can move to or invest in and find some of America's most-affordable homes relative to local incomes.

"A city that grades well in our study is a place where you can get a bigger, nicer home at any price point than you can in a city that grades poorly," says Mike Sante of Interest.com, which recently analyzed housing affordability in the nation's 25 largest cities. "For $200,000, you can buy yourself a pretty nice house in Atlanta -- but what can you find for $200,000 in New York City?"

To find the best bargains, Interest.com calculated how much you'd pay each month for a median-priced home in each city, assuming you put 20% down and got a 30-year fixed mortgage that charged the local average interest rate.

Next the site added median local property taxes and homeowners insurance premiums and looked at whether a family earning a given city's median household income could meet the "28% rule." That standard, which many lenders use when deciding whether to OK a mortgage, looks at whether a borrower can pay all monthly housing costs using no more than 28% of gross income.

Interest.com found that consumers in highly affordable cities need barely half of median household income to meet the 28% rule, while those earning median incomes in high-priced locales fall way short.

That doesn't surprise Sante.

"The real estate industry keeps saying how prices are down, mortgages are cheap and homes are incredibly affordable, but our study shows that housing is composed of lots of different local markets," he says. "If you're sitting in New York, you're saying: 'I still can't afford a home here. Not much has changed.'"

Sante says the nation's most-affordable cities all have plenty of buildable land, unbound by the oceans or mountains that constrain new construction in costly locales such as San Francisco.

The expert says low-cost cities also generally fall outside of hurricane-prone areas, meaning homeowners insurance costs less.

Click below to check out the five cities Interest.com found have the most-affordable home prices relative to their local median incomes.

The site calculated affordability using median single-family-home prices as of the second quarter; 30-year fixed-mortgage rates as of Sept. 19; median household incomes and property taxes as of 2011; and average annual homeowners insurance premiums as of 2009.

"Above-average" and "below-average" figures refer to the average of all 25 cities analyzed -- $50,502 for incomes, $2,331 for property taxes and $880 for insurance premiums. "Average home prices," though, refer to the $229,516 median found in a larger pool of locations that the National Association of Realtors tracks.

Fifth-most-affordable U.S. city: St. Louis

The "Gateway to the West" offers consumers a great gateway to homeownership because it has below-average median home prices ($131,700) and an above-average median income ($51,164).

St. Louis also boasts below-average median property taxes ($2,132), while the typical St. Louis resident pays $881 for homeowners insurance -- just $1 above the nationwide average.

Add it all up and a median St. Louis household income provides 23.5% more money than you need to qualify for a mortgage on a median-priced home.

Sante says St. Louis has low home prices because the city has lots of room to expand.

"They're still building in St. Louis," he says. "There's abundant land there."

Fourth-most-affordable U.S. city: Phoenix, Ariz.

By the time you get to Phoenix, you can probably afford to buy a house there.

That's because prices have tumbled so much in the metro area's once-booming market that a median-priced home there costs just $148,400 -- well below the U.S. average.

"Phoenix is kind of a poster child for those markets that have seen very big drops in home prices," Sante says. "Housing that wasn't all that affordable prior to the bubble's burst has become very affordable there now."

Arizona's capital city also boasts below-average median property taxes ($1,437) and homeowners insurance ($642).

Couple that with a decent $50,058 median income (just $444 below the 25-city average) and the "Valley of the Sun" offers home buyers great affordability.

Interest.com found that Phoenix families who make the local median household income earn 23.7% more than they need to get a mortgage on a median-priced home.

Third-most-affordable U.S. city: Minneapolis

The Twin Cities offer great affordability, thanks to the twin factors of above-average median incomes ($63,352) and below-average median home prices ($174,500).

True, Minneapolis has higher-than-average property taxes ($2,683) and homeowners insurance ($919).

But Interest.com found that families who make the local median income will qualify for loans on median-priced homes with 32.2% of their salaries to spare.

Second-most-affordable U.S. city: Atlanta

"Atlanta's got everything going for it," says Sante, whose website found that a median income there provides 40% more than you need to qualify for the mortgage on a typical home.

Georgia's state capital boasts an above-average median household income ($52,639), but below-average median home prices ($103,200), property taxes ($1,891) and homeowners insurance premiums ($787).

No. 1 most-affordable U.S. city: Detroit

Motown takes top honors for housing affordability, but Sante says it's a "special -- and especially sad -- case."

The expert says abandoned properties in Detroit's struggling urban core have artificially depressed median home prices to just $60,200, the lowest of any city in Interest.com's study.

"There are thousands of homes in the city of Detroit that are selling for $10,000, $15,000 or $20,000 -- which drags down the median," Sante says.

Detroit also has below-average median insurance premiums ($740), helping to offset above-average median property taxes ($2,751).

All told, Detroit's $48,988 median household income -- while below average for the 25 cities studied -- is 45.3% more than you need to qualify for a mortgage on a median-priced home.

Still, Sante says that's not necessarily enough of a reason to move there.

"We think of Atlanta as a better example of a town that has everything going for it," he says.

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