Which Housing Markets Have The Steepest (And Cheapest) Price Tags?

As many homeowners know (and as many potential homeowners can guess), the nuts and bolts of calculating home prices and home values are a little complicated. Here’s one big factor: The housing market where you are looking to buy a home has a lot to do with what you’ll ultimately end up paying. The Federal Reserve Bank of St. Louis recently released a report that highlights home prices and values around the country — and here are some highlights:

Big Differences Exist in Home Values Across the United States

We all know that some cities have somewhat of a reputation for having costlier housing markets than others (we’re looking at you, New York and Los Angeles), but it is true that home prices vary greatly across the country. It’s also true that across various U.S. housing markets, average home prices can change at different rates. So what’s a good method to determine the value of homes in any given market?

William R. Emmons, assistant vice president and economist at the Federal Reserve Bank of St. Louis and the author of the St. Louis Fed’s recent report, cites “long-term changes in the ratio of average house prices or rents to personal incomes” as the best gauge of a housing market’s “relative attractiveness.” As Emmons explains, looking at home prices in a market relative to that same market’s average income statistics allows for meaningful comparisons across metro areas. Emmons also notes that local amenities differ across metro areas, so this measurement ensures that amenity-rich cities aren’t just labeled as being too expensive because they offer value in the features that other markets do not have (e.g. San Diego offers pleasant weather and proximity to the coast, so it is logical that it might cost more to live there than in other landlocked parts of the country that experience more inclement weather).

Which Housing Markets Are The Least (And Most) Expensive?

The metro housing markets that rank in the report for the best value for owning a home are mostly in the Midwest:

• Detroit, Cleveland, and Cincinnati offer homeowners the best value for a home purchase.
• San Francisco, Miami, and Los Angeles round out the bottom of the value list with the worst home values
• Rentals vary slightly, with urban Alaska, Philadelphia, and Atlanta offering renters the best value (and Baltimore, New York, and Miami offering the worst).

It’s not really surprising that the east and west coasts both have relatively low home values with competitive job markets and high housing prices. The Midwest and southern markets offer high values, so for homebuyers looking to relocate, the value is something to potentially consider (along with overall price, taxes, and other factors).

Do you need to know just what it takes to buy a new house? Read our home buying guide and learn more about everything from down payments to closing.