Renting homes and apartments rather than buying them is a practice that's on the rise in the US, especially with millennials. As a result, most of us have had that moment where the walls of our one or two bedroom apartment feel like they're closing in.
When you're breaking the bank month after month on rent alone and not investing any money in your property, it can start to feel like you're just throwing money out into the void.
Maybe you wanted a little more space, maybe you've realized you don't like being a renter anymore, or maybe just spending time farming in a video game made you realize what your life's true ambitions really were.
Either way, you've come to a decision -- you want, or perhaps even need, to buy a house. But you've been renting your whole life, and housing prices where you live seem wildly expensive. So where can you go where you can get the most house for your buck?
We were curious -- so, using housing data from various sources, we made a calculator to help you figure out just that. By inputting how much you pay per month for rent, our calculator can tell you the average house size you'd be able to afford after paying for a mortgage, home insurance, and property taxes.
Based on a rent of $500 here's how much you could afford in Alabama and a breakdown of where your $500 goes:
We used data from Zillow's hom price index from May 2017 to figure out what home prices were like at various places in the US. Then we used Lending Tree data for state-to-state information like average monthly mortgage payments, average interest rates, and average LTV.
Putting this all together, we're able to estimate the average size of a house you could afford to make payments on based on how much you pay to rent.
Let's say you're a fresh college graduate working an entry level job for $20,000 a year (in other words, let's say you were an English major). If you're budgeting correctly, you should try to spend 25% or less of your onthly income on rent, but that can be tough to stick to -- given especially that we're talking about a recent college graduate, let's use 30% as our rent marker.
That's $500 a month set aside to be spent on rent, which is perfectly doable if you have a roommate (depending on where you're living in the US).
But now let's say you wanted to start looking to buy a house. We'll ignore the process of finding another similar job for the moment (that's what the rest of our website is for, after all) and assume you'll still be making roughly the same amount of money wherever you go. Where do you go to get the best deal on property?
If you're anything like the person described above, West Virginia might be a good bet.
The insurance costs and property taxes are somewhere in the middle as far as the other states go (around $58 and $52 respectively), but the price per square feet of $73 is much lower compared to the national average.
For $500 a month, the average home size you could afford is somewhere around 1,468 square feet. For point of reference, here are the plans for a house with a square footage of only 1,412 sq ft.
When you take a look at what a person spending $500 can afford at the other top states, a pattern starts to emerge pretty quickly: Mississippi takes second place with a home size of 1,378 sq ft, followed by Alabama with 1,307 sq ft, and Indiana with 1,283.
While these states all have bustling major cities and many of them -- Alabama especially -- have impressive or burgeoning art scenes, these states also tend to have high poverty rates in the rural areas outside of their cities and suburbs. The lower housing prices that might result from this may be offsetting the higher priced housing in these states' larger cities -- however, even if this is the case, housing is certain to be more affordable than in places like California or the Northeast, where space is at a premium.
The three states in particular that we'd like to point out here are Hawaii, New Jersey, and Florida, each of which has landed themselves at or near the bottom of our list in terms of housing affordability and size, but each for a very different reason.
Let's start with the numbers -- if you pay around $500 a month for rent, then (taking into account home insurance and property taxes) here's the average house size you could afford in each state:
So what sort of house are we looking at for this kind of square footage? The answer is something smaller than most trailers, RVs, or studio apartments.
Here's an example of a 250 square foot house, albeit an extraordinarily nice one.
Florida's 625 square footage is a little bigger, but still falls pretty easily into the "tiny home" category. Here's an example of a 350 square foot house as a frame of reference -- as you can see, it's still pretty cozy.
But why bring up these states in particular?
Hawaii's a well-known tourist destination, so it makes sense that its housing costs would be ludicrously high -- but did you know that its home insurance rates and property taxes are actually quite low? For someone who's spending 500 dollars a month for housing costs in Hawaii (which, good luck), they'd spend roughly $18 of that on their monthly insurance and about $28 on their monthly property tax. For some context, the national average for a person paying $500/month is $71 for insurance and $130.50 for taxes.
Meanwhile, the dollars per square foot ($/SQF from here on out) for Hawaii is the highest in the nation, at around $480 for Hawaii, compared to the national average of $141.64. But it's important to note that this is an average, and it might not be representative of your own experience trying to build or buy a home in Hawaii for the simple reason that location is a huge factor when it comes to the cost of Hawaiian homes, more so than for most other states.
As this Island Realty website describes, the cost per sqaure foot in just the Kona area of the Big Island can range from $152-$1579, with the presence (or lack) of oceanside views and distance to town being some of the biggest contributing factors to this.
New Jersey's $/SQF is much lower at $180 per square foot, and its monthly insurance rate of $25 isn't much higher. However, New Jersey also has the highest property taxes in the nation, with a person who pays $500 a month on housing spending a whopping $167 on taxes.
There are a lot of explanations for this, including everything from state history to population density and the high cost of living, but one of the biggest reasons for this is just that New Jersey has a high number of public programs and uses property taxes to foot most of the bill for these.
Despite being the 5th smallest state due to its total square mileage of 7,417, New Jersey has 565 municipalities and 600 school districts -- compare this to North Carolina's 48,711 square mileage and its 244 school districts.
The last state we wanted to bring up was Florida, whose property taxes and $/SQF were both slightly below the national average for a person spending $500 a month on housing -- $121.13 and $73, respectively. It would have been closer to the middle of the list were it not for Florida's exorbitantly high home insurance costs, which for our $500 a month homeowner were roughly $124 a month.
Why so high? Probably because of Florida's extraordinarily high disaster rate. According to a Weather Channel Report, Florida ranks second highest in the nation for disaster risk (behind only California). It ranks as the third most at risk state for wildfires, and the absolute highest state for hurricane risk.
As this Florida housing insurance company's website describes, this causes property insurance rates to skyrocket in Florida as compared to otherwise similar states. So while your beautiful Florida home won't cost you too much on its own, keeping it insured against almost certain doom will put a pretty big dent in your wallet.
That's all for this one -- but if you're interested in articles like this, we have a few more you can check out here at Zippia.
Looking to attend college after you move into your new house? Our article on the 10 best states for in-state tuition costs can help you find a school in your new state.
Or maybe you're looking for more researched articles like this one? Find out why women are more likely to get out of speeding or parking tickets, and what times you should stay off the road to avoid getting one yourself.