The cheapest states to buy a house in 2023

It’s increasingly challenging for many home seekers to afford a residence. That’s because mortgage interest rates have climbed much higher over the past year and the average sales price remains out of reach for many prospective purchasers. But if you look closer at the cheapest states to buy a house, you may find a market where you could find a bargain.

What are the cheapest states to buy a house in, and what are the most affordable states to live in? That depends on what list you look closely at, as the latest findings will vary. To help you make a more informed decision, we consulted with several real estate experts and trusted industry sources.

What are the cheapest states to buy a house?

Finding the cheapest states to buy a home in, which doesn’t necessarily mean the most affordable states to live in, involves looking closely at the freshest data and various lists provided by real estate organizations.

Currently, the National Association of Realtors (NAR) ranks the following states as the most affordable:

1. Ohio
2. West Virginia
3. Iowa
4. Indiana
5. Illinois

Meanwhile, according to Homebuyer.com, based on U.S. Department of Housing and Urban Development and World Population Review data, the cheapest states to live in are:

As you can see, not every source/list matches in their ranking of the cheapest states to buy a house. For further proof, consider this ranking by Forbes, which closely investigated the cost of living and determined that these states are the most affordable, in order:

1. Mississippi
2. Kansas
3. Alabama
4. Oklahoma
5. Georgia
6. Tennessee
7. Missouri
8. Iowa
9. West Virginia
10. Indiana

Big cities with the cheapest houses

ATTOM recently investigated the largest markets where major expenses on median-priced homes remain the most affordable. The cities that made its list, primarily located in the Midwest, include:

• Chicago
• Houston
• Detroit
• Philadelphia
• Cleveland

What is the cheapest small city to buy a house in?

Drilling down further, the NAR currently lists the following as the most affordable smaller market areas in the country for a home purchase:

1. Decatur, Illinois
2. Cumberland, Maryland-West Virginia
3. Peoria, Illinois
4. Springfield, Illinois
5. Elmira, New York

“In these areas, the typical family earns at least two times the income needed to purchase the median-priced home,” explains Nadia Evangelou, senior economist and director of Real Estate Research for the NAR. “For example, in Peoria, the median family income is about $81,000, compared to $40,000, which is the qualifying income to purchase a median-priced home in this area.”

Hidden gems in the real estate market

Last year, the NAR published a report called 2022 Housing Market Hidden Gems. These represent ten undervalued markets that “underperformed in 2021 relative to their underlying market fundamentals,” markets where stronger price appreciation relative to other markets in 2022 was anticipated. These ten markets are:

1. Dallas-Fort Worth-Arlington, Texas – $297,506 (estimated value of the property as of 2021 quarter #2)
2. Daphne-Fairhope-Foley, Alaska – $293,976
3. Fayetteville-Springdale-Rogers, Arkansas/Missouri – $233,786
4. Huntsville, Alabama – $240,171
5. Knoxville, Tennessee – $228,828
6. Palm Bay-Melbourne-Titusville, Florida – $278,454
7. Pensacola-Ferry Pass-Brent, Florida – $231,168
8. San Antonio-New Braunfels, Texas – $227,684
9. Spartanburg, South Carolina – $185,571
10. Tucson, Arizona – $261,046

What factors influence housing affordability?

Several factors can impact how much you will pay for a home in a given state.

Ask Muoki Musau, a Realtor with Houwzer, and he’ll tell you that the biggest influences on affordability are the state’s economy, wages, and unemployment rates.

“States and cities with high household incomes tend to have higher home prices. Higher home prices also contribute to economic growth through job creation, consumer spending, and home appreciation,” he says. “Wages impact affordability because they directly impact the range of average income that a household brings in, while employment rates determine the number of high-paying, secure employment opportunities in that area.”

Omer Reiner, a licensed real estate consultant in Fort Lauderdale, agrees but with a caveat.

“I believe the most important factor for housing affordability is the local job market. If that is strong, housing prices will tend to be high because people can afford those properties,” adds Reiner.

Fast growth trends in particular tend to overheat housing markets and lead to unaffordable prices, per Martin Orefice, CEO of Rent To Own Labs.

“The Seattle and San Francisco areas are great examples of this phenomenon. Conversely, a lack of good jobs in an area can make even relatively low home prices unaffordable for most of the people who live there. A good balance between these two extremes tends to be ideal,” he says.

Migration trends

Evangelou cites Florida, Texas, North Carolina, and South Carolina as the states with the most net domestic migration gains in 2022, based on U.S. Census Bureau data.

“A common characteristic of these populous states, aside from the fact that they are located in the Sun Belt region, was a strong job market recovery after the pandemic,” she says.

Reiner points to Idaho, Montana, and Arizona as states where inbound migration is particularly active, per US Census Bureau data tallied between 2020 and 2022.

At more of a local level, data show that Americans continue to migrate to less dense areas, Evangelou points out; eight out of 10 metro areas with the largest inbound move rate had a population smaller than 250,000 residents.

“Among larger metro areas,” she continues, “inbound moves exceeded outbound moves by more than six percentage points in Ocala, Florida; Tallahassee, Florida; Charlotte, North Carolina; Savannah, Georgia; Houston; Deltona, Florida; and Myrtle Beach, South Carolina.”

Tips for buying a cheap house

Thinking seriously about relocating to a state where it’s less costly to purchase a home? You’re not alone. But prepare to do your homework before committing to a major out-of-state move.

“Buyers should consider broadening their home search to more affordable areas. Or, instead of moving out of state, explore looking for a home in an adjacent county where homes may be less expensive,” Evangelou recommends.

Don’t just base your decision to move on home price alone. Do the math and determine your cost of living in a new area, including factors like commute time to work, quality of the local schools, crime rate, and area amenities.

“Three common priorities are the home’s price, the home’s size, and the home’s location. Buyers should prioritize two of these three and be flexible on one of them,” Musau advises. “Often, this flexibility will allow you to find a home you can afford and that you are happy with. The most important thing to determine is whether or not the place you are moving to can give you the quality of life you want. The worst thing is to move somewhere and be miserable, even if you can afford it.”

Lastly, Reiner suggests closely examining states in areas where net migration is currently negative.

“These areas may offer inexpensive housing with growth potential,” he says. “Also, I would never move out of state simply because of remote work possibilities. Remember that many employers are asking for a return to the office, and some remote workers are being laid off.”

The bottom line

Want to buy a house in one of these popular cities or states? Before you shop around and see what mortgage rates you qualify for, compare cost-of-living differences and do sufficient research on the local job market and economy. Once you have a location in mind, work with a licensed real estate agent so you can buy with confidence.