The 10 most expensive places to live in the world

 

The 10 most expensive places to live in the world

In the latest Worldwide Cost of Living report by the Economist Intelligence Unit

 (EIU), three US cities secured spots in the top 10 most expensive cities globally. New York, which shared the top spot last year with Singapore, came in third in the new list, while Singapore retained its place at the top, joined by Zurich, Switzerland. Veuer’s Maria Mercedes Galuppo has the story.

10 Best & Affordable US Cities To Buy A Starter Home

In the 1960s, the median size of a single-family home in the U.S. Was roughly 1,500 square feet. Most homes built then were "starter homes" because they were affordable and ranged from 1,200 to 2,000 square feet (around three bedrooms). Starter homes are ideal for young adults or young couples who want to own property but don't need a ton of space or are perhaps looking to break into the real estate investment market.

Nearly six decades later, the median single-family home has grown to 2,287 square feet as of March 2023. And there's been a decline in starter home construction since 2008, while existing homes have shot up in price, causing millennials to pay much more for a home than previous generations.

Although there's a scarcity of starter homes across the country, there are still plenty of starter homes in certain U.S. Cities. This Old House rounded up the best cities to buy a starter home based on price, availability, income, and comparable rent while factoring in quality-of-life factors such as dining, entertainment, and crime rates. Check out our findings and review the methodology section below for more details on data collection.

Main findings

The Lone Star State has three top 10 cities to buy a starter home (El Paso, Fort Worth, and Laredo, Texas).

New homebuyers also looking to be near water may be in luck. Two of the best places to buy a starter home are beach towns; Virginia Beach, Virginia (No. 3), and St. Petersburg, Florida (No. 9).

Data shows that the average price of a starter home is less than $100,000 in eight cities, but greater than $500,000 in 13.

Port St. Lucie, Florida, (No. 32) has a 60% homeownership rate for people under age 35—the highest of the 100 cities we analyzed.

Top 10 best cities to buy a starter home

These 10 cities are the best places in the U.S. To buy a starter home based on our analysis. These cities scored the highest after being ranked on cost and lifestyle factors, including the average cost of a starter home, mortgage as a percentage of income, availability of restaurants and entertainment establishments, and crime rates.

Top 10 most affordable cities for starter homes

If affordability is top of mind as a prospective homebuyer, the Midwest is an excellent place to start. These 10 cities are the most affordable places to purchase a starter home, with the lowest mortgage-to-income percentage. The average starter home price as shown is determined by the median value across the bottom third of priced homes in the area (fifth to 35th percentile).

Buying a home has plenty of advantages (and disadvantages). A starter home isn't necessarily intended to be your forever home, so it may come with a few more considerations.

Advantages of buying a starter home

Homeownership is a top goal for many Americans for good reason—there are many benefits to buying your first home. Let's review the top three advantages to buying a starter home:

1. You get a taste of homeownership at a lower cost.

The most attractive feature of a starter home is (presumably) that it will cost you less because of its modest size or less popular location. Buying a more affordable home allows you to become a homeowner without waiting years to save up a hefty down payment.

A smaller home also means it will require less furniture and upkeep, which will save you money on overall housing costs.

2. You can build home equity.

You won't ever get back all that money you spend on rent. But with monthly mortgage payments, your housing expenses are helping you build home equity (the difference between your home's value and the mortgage). Think of it as building up your net worth.

Depending on your situation, it may be beneficial to use your home equity from your starter home to purchase your "forever home" down the line. This can be especially true if you plan to keep your starter home as a real estate investment.

3. You can use it as a real estate investment in the future.

Real estate investment is rising, with the market expected to hit $30.5 billion by 2031. If you're one of the 34% of Americans who believe real estate is the best long-term investment opportunity, buying a starter home is a good way to get started. When it's time to move into your forever home, you can rent out your starter home or try to sell it for a profit.

4. You feel less pressure to buy the perfect home.

Your starter home will most likely not be your dream home—and that's the point. Buying a starter home should be less stressful than a forever home because your first home doesn't have to "check all the boxes." It should be just big enough for your family and able to meet all your needs, not your wants. A starter home is a perfect opportunity to experience homeownership and learn what features you want (and don't want) in your future forever home.

Disadvantages of buying a starter home

While buying a starter home is a sound financial investment for many, it can spell disaster for others. Before you start shopping, consider the following disadvantages of buying a starter home:

1. It may require a lot of money.

Homes are bigger these days, so starter homes are often older and may even be fixer-uppers. You'll want to get a proper home inspection before buying and ensure you have enough cash to deal with repairs. Fortunately, fixing up the home can lead to a bigger profit when it's time to sell or rent, but you want to make sure it makes financial sense, too.

2. It's hard to find.

As discussed, there's a shortage of starter homes. As of March 2023, the average-sized home is 2,525 square feet, and you'll be paying for every inch. The lack of affordable starter homes could make for a frustrating home-buying experience, and it might not be worth the headache for a home you plan to move out of in only a few years.

3. You'll have to buy another home, move, and (potentially) sell.

The home-buying process is a lot to handle—and so is moving. But you'll have to do those two things again if you buy a starter home. Plus, if you're not keeping your starter home as a rental property, you'll have to sell it, which could be difficult depending on the outlook of your local housing market.

4. You could lose money.

Many people buy a starter home to increase their net worth, but the opposite can happen. If you buy in an area with a depreciating house value or have to invest too much money into fixing your starter home, it could cost you more than your profit. Also, remember that, in some cases, you'll have to pay capital gains taxes on selling your starter home before you move into a new one.

In conclusion

The starter home may be becoming a thing of the past, but the idea is still attainable in many U.S. Cities. Although millennials mostly chose to rent for longer to save up for their dream home, Gen Z is taking promising strides toward homeownership, tracking ahead of their parents' generation thanks to the pandemic-era low mortgage rates. If your dream home still feels years away, investing in a starter home may be a sound financial decision for you to build up your home equity and (potentially) break into the real estate investment market.

Methodology

The This Old House Reviews Team compared 100 of the largest U.S. Cities across six metrics to rank the best cities to buy a starter home. These six metrics are explained below, along with the data sources:

Average starter home cost: This is the median value across the bottom third of priced homes in the area (fifth to 35th percentile). Data comes from Zillow and represents the average from May 2022 through April 2023.

Mortgage as a percentage of income: The average mortgage payment is based on a 30-year fixed-rate mortgage at 6.4% applied to the average starter home cost. Income represents the median household income for renters in the area. Data comes from Zillow and the U.S. Census Bureau's 2021 1-year American Community Survey.

Young homeownership rate: This is the number of owner-occupied housing units divided by the total occupied housing units for individuals under age 35. Data comes from the U.S. Census Bureau's 2021 1-year American Community Survey.

Concentration of restaurants: This is the number of restaurants per 10,000 people. Data comes from the U.S. Census Bureau's 2021 County Business Patterns Survey.

Concentration of entertainment establishments: This is the number of entertainment establishments per 10,000 people. Data comes from the U.S. Census Bureau's 2021 County Business Patterns Survey.

Violent crime rate: This is the number of violent crimes per 10,000 people. Data comes from the FBI's Uniform Crime Reporting as of 2019.

We calculated an average ranking using the six metrics above, half-weighting the concentration of restaurants and entertainment establishments and single-weighting all other metrics. The top-ranking city scored 100, and the worst received a 0.

This story was produced by This Old House and reviewed and distributed by Stacker Media.