Buying a house is about the biggest purchase you can make. The process of finding a house can be daunting, especially when it comes to affordability. Knowing where to look, where the best deals are and where prices are about to skyrocket is helpful as you start your search.
According to Rachel Musiker, a spokeswoman for the national real estate brokerage Redfin, many potential buyers are looking to leave expensive coastal markets in search of relative affordability. Musiker says some places they're turning to are Sacramento, Phoenix and Las Vegas.
"Redfin agents in those markets report that they are helping a lot of people move from cities like San Francisco and Los Angeles, which have become unaffordable for many homebuyers," she says.
With home prices rising in most major metros across the country because of low inventory and strong demand, according to Musiker, cheap places are harder and harder to come by, and affordability is relative.
Markets that are among the most affordable in the U.S. include Buffalo, where the median home sale price is just over $132,000, and Cleveland, with prices around $135,000.
"People from other parts are seeking out their cities for the relatively low cost of living and high quality of life," Musiker says.
She says prices are on the rise in major markets across the country where demand continues to outpace supply of homes. Those cities include Detroit, Fresno, Tacoma, New Orleans and San Jose.
"Yes, even San Jose, with a median sale price above $1 million, is an affordable destination for people in nearby San Francisco," Musiker says.
The housing market continues to be largely driven by jobs -- i.e., where people can work and make a living -- Musiker says. Because of this, several cities in Texas -- Dallas, Austin, Houston and San Antonio -- have become popular destinations.
"The great thing about these markets is that they also aren't suffering from the same severe supply constraints as other parts of the country, and more new homes are being built there than in other parts of the country," Musiker says.
Nashville is another popular destination, according to Musiker, and it also has a relatively high level of new construction. She says home prices there have been rising pretty quickly, up 10 percent year over year in February.
A recent article on Trulia used five key metrics to determine the 10 real estate markets with the highest growth potential among the 100 most populated metropolitan areas in the country. The metrics were job growth, affordability, vacancy rates, home search rates on Trulia and the number of young households. Those 10 cities include the above-mentioned Nashville, San Antonio and Austin, as well as Grand Rapids, with a median home sale price of $163,750, Raleigh, with homes averaging $250,000, El Paso, with prices around $186,611, Columbus, with homes around $159,900, Fort Worth, Madison and Cincinnati.
Musiker says the biggest challenge for homebuyers continues to be a lack of inventory. According to the Kaminsky Real Estate Group, there has been an inventory shortage in the U.S. housing market since 2015, forcing some buyers to settle and keeping others out of the buying game entirely. But by this fall, that should begin to change, with markets in Boston, Detroit and Nashville recovering first.
One thing to watch this year is how tax reform legislation signed into law last year will affect residents in big coastal markets, such as New York and Los Angeles. The maximum amount of mortgage debt you can deduct interest from has been reduced from $1 million to $750,000 for new mortgages. Additionally, the ability to deduct state and local property taxes has been capped at $10,000, where a limit didn't previously exist.
"We are watching movement from high-tax markets in California and New York to see if people do leave in search of lower taxes," Musiker says.
Musiker says home prices will continue to rise this year, pushing up mortgage costs, but all in all, 2018 is a great time to buy a home.
"Home prices are rising, and even though mortgage rates are starting to rise, they still remain near historic lows."