In 2019, the median home price was $297,000 with mortgage rates in the mid-fours, putting homeownership well within reach for families with a $2,000 monthly housing budget. But five years later, that same dollar figure requires much more compromise.
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“A $2,000 monthly budget in today’s housing market stretches differently across the country, reflecting a fascinating tapestry of regional economic dynamics,” said Dennis Shirshikov, professor of finance, economics and accounting at the City University of New York and head of growth at real estate investing site Awning. “In burgeoning metropolitan areas, this might secure a modest condominium or a small family home in the suburbs, illustrating the urban-rural price gradient. Yet, in more rural or less economically vibrant areas, the same budget could afford a larger property or one with more amenities.”
Here’s a look at what $2,000 a month buys you in today’s housing market.
$2,000 Mortgages Are More Common Than You Might Think
A new study from GOBankingRates examined where the average homebuyer can still afford a mortgage with a monthly budget of $2,000. The study takes 2023 average home values from Zillow for all 50 states and presumes a 20% down payment, with the rest financed on a 30-year fixed-rate loan at 6.27% interest. After factoring in property taxes, the data reveals that it’s still possible to buy a house in a little more than half the country — 28 states — with a monthly budget of $2,000.
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Less Than $250K With 3% Down or Up To $350K With 20% Down
According to Zillow, the average home in America costs roughly $343,000, which doesn’t bode well for buyers on a $2,000 budget — especially considering today’s interest environment.
“With mortgage rates near 7%, the principal and interest payment alone can cost roughly $2,000 on a $300,000 loan amount,” said Colin Robertson, a former account executive for a large Los Angeles wholesale mortgage lender and founder of The Truth About Mortgage. “Buyers must also factor in property taxes and homeowners insurance, which may add an additional $500 per month or more.”
The study shows that in Delaware, where the average monthly mortgage payment comes in just under the wire at $1,927.53, the average home value is $355,120 and property taxes are $175 per month.
But what about those who put down less than the traditional 20%, as the GOBankingRates study presumes?
“With a monthly mortgage payment of $2,000 including PITI — principal, interest, taxes and insurance — plus PMI if they buy using an FHA loan that only requires a 3.5% down payment, a person can buy a property priced below $250,000,” said Boris Vasquez, founder of Bullplace, a California mortgage and real estate company. “Today’s rate for someone with decent credit would be around 6.2%, keeping their payment below $2,000.”
City vs. Country: Generally, Housing Prices Fall With Population
Shirshikov mentioned the “urban-rural price gradient,” which is one of the biggest housing cost differentiators.
“In major cities and urban areas, $2,000 may not get you very far when it comes to renting or purchasing a property,” said Danny Colacicco, founder and CEO of Panda Pro Home Buyers in Baltimore. “Housing prices in these areas are typically higher than in suburban or rural areas, and you may find that your budget limits your options. In suburban or rural areas, $2,000 can go a long way. With lower housing prices and a wider range of options available, you may be able to find a larger house or even a property with some land included in your budget.”
The GOBankingRates study backs that up. All four states with average monthly mortgage payments in the three figures — West Virginia ($787.02), Mississippi ($878.35), Arkansas ($963.21) and Louisiana ($980.95) — are among the most rural in the country.
By comparison, the average mortgage in California, known for its big, expensive cities, is $4,841.16 — but that doesn’t mean more heavily populated urban centers are necessarily out of reach.
“Don’t be discouraged just yet,” said Colacicco. “If you are willing to look outside of the city center and consider other types of housing such as apartments or townhouses, $2,000 can still get you a decent place to live.”
Geography Matters: Stick With the South and Midwest
It’s not just the rural-urban dynamic. Regional geography also plays a starring role in how much house a $2,000 monthly budget can buy.
“Geographical location drastically influences what you can get, with more value found in the Midwest and South compared to the coasts,” said Keith Matthews, sales manager with Red Pin Properties.
Yancy Forsythe, owner and founder of Missouri Valley Homes, knows both lower-cost markets intimately and agrees with Matthews’s assessment.
“To comfortably enjoy the benefits of a $2,000 budget in today’s housing market, it would only be applicable to individuals in the Midwest and Southern markets, as it more aligns with median home prices,” said Forsythe. “The significant rise in home prices over the past three years, as well as mortgage interest rates, has significantly shrunk the opportunities for homebuyers with a $2,000 monthly budget overall, but especially so outside of the aforementioned markets.”
Here, too, the study backs up the experts. Of the 28 states with sub-$2,000 monthly mortgages, all but five — Delaware, New Mexico, Pennsylvania, Texas and Wyoming — are in the South or Midwest. (Texas is considered to be on the regional border between the Southwest and South. Regardless, it’s more expensive than other Southern states but still affordable compared to coastal states.)
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This article originally appeared on GOBankingRates.com: What a $2,000 Monthly Budget Gets You in This Housing Market
