While the nation's real estate crash has been a nightmare for homeowners, it has created some outstanding opportunities for would-be buyers. Home prices in 20 major cities dropped 33 percent from the summer of 2006 to the spring of 2009—and in certain markets, the plunge was even steeper. At the same time, the federal government's efforts to revive the housing market have helped drive financing costs to record lows. Thirty-year fixed mortgage rates fell to an average of 4.32 percent for the week ending September 2. That's the lowest level in nearly 40 years of record-keeping. Lower property values and dirt-cheap mortgage rates have combined to restore affordability to many real estate markets that were once wildly overpriced. "Right now, housing is about as affordable as it has been since at least the 1970s," says Patrick Newport, a U.S. economist for IHS Global Insight.
To see how far your real estate dollar will stretch in different places across the country, U.S. News examined housing costs on a monthly payment basis. We started with the National Association of Realtors' median home price data for 159 distinct metropolitan statistical areas as of the second quarter of 2010. After subtracting a 20 percent down payment from a market's median price, we plugged the remaining figure into a mortgage calculator using a 4.32 percent interest rate on a 30-year fixed loan. The exercise produces a monthly payment figure for mortgage principal and interest, which represents the bulk of most property owners' monthly housing costs. (Note that this figure does not include monthly costs for utilities, insurance, or taxes, which can vary a great deal from one place to another. Nor does it reflect the one-time costs associated with a home purchase, such as the down payment and closing costs.) Using this calculation, here is a look at 10 places where you can buy a home for less than $800 a month.
[In Pictures: 10 Great Places to Buy Homes for Less Than $800 a Month.]
1. Austin, Texas: Anyone who's ever visited lovely Austin knows that it's much more than just the capital of the Lone Star state. Great barbecue, abundant green space, and a world-class music scene have turned this city of 735,000 into one of the nation's most beloved destinations. And as the home of the University of Texas and the heart of a dynamic local economy, Austin offers a wonderful quality of life to residents and visitors alike. The median home price in the Austin area stood at nearly $197,000 in the second quarter of this year, a slight increase from a year earlier. After a 20 percent down payment—of $39,400—monthly payments for mortgage principal and interest on a median-priced home in Austin come to $782.
2. Sarasota, Fla.: Although exotic mortgage products and investor excitement sent home prices in Sarasota soaring during the housing boom, the subsequent crash hit the market as hard as anywhere in the state. Median home prices in the Sarasota area plummeted from $311,000 in 2007 to $185,000 in the second quarter of this year. But this steep drop only makes this sun-drenched community on Florida's west coast more attractive for home buyers, says Jack McCabe of McCabe Research & Consulting. McCabe says Sarasota's smaller size provides its residents with a more manageable lifestyle—with less traffic, for example—than big cities like Tampa Bay or Orlando. At the same time, the area has a beautiful waterfront and plenty of art museums and theater productions. Anyone considering buying property in Florida should have Sarasota at the top of their list, according to McCabe "It's a great market," he says. "I really expect in the next 20 years it is going to be one of the most desirable markets in Florida for baby boomers to retire." The median home price in the Sarasota area was $185,000 in the second quarter of this year. After putting 20 percent—or $37,000—down, monthly payments for mortgage principal and interest on a median-priced Sarasota area home come to $734.
[In Pictures: 10 Cities for Real Estate Steals]
3. Albuquerque, N.M.: A vibrant blend of Native American, Latino, and Anglo cultures makes Albuquerque one of the nation's most diverse communities. Residents can explore this unique heritage through the city's expansive menu of museums, art galleries, and theaters. Its enviable climate—which averages more than 300 days of sunshine a year—provides plenty of opportunities for golfing, biking, and hiking. During the winter months, skiers and snowboarders can hit the nearby Sandia Peak Ski Area during the winter months. The median home price in Albuquerque was $178,000 in the second quarter of this year, down about 2 percent from a year earlier. After a 20 percent down payment—or $35,600—monthly payments to cover mortgage principal and interest on a median-priced Albuquerque home are roughly $706.