Buying a house for cheap is everyone’s dream. You might get something but in this hot market, it’s hard to find anything for less than $25,000.
Q: I recently read an article you’d published about being able to buy a house for $5,000. I am looking to purchase a house and have saved up $7,000. I understand the house will need to be fixed up. Where would you suggest I begin?
A: For about 10 years, Ilyce wrote about 12 columns per month for a website called Moneywatch. This site is now CBSNews.com. Because everything lives forever online, you can still find these columns. You stumbled upon that was published in 2017, “10 homes you can buy for $5,000.”
The hot market makes it harder to buy house that are cheap
But the real estate market has changed significantly in the past eight years, and due to a number of factors, including lack of homes for sale, mortgage interest rates at or near historic lows, and a pandemic that sent city dwellers to the suburbs and beyond, cheap homes have all but disappeared.
In fact, you’ll be hard-pressed to find a house that you can live in for under $5,000. If price is more important than location, your best bets include small cities and towns, and more rural locations. You might also find a foreclosure in a city or be able to pick up a home for back taxes (you’ll likely owe the the unpaid taxes on the home) at a sheriff’s sale.
Try HUDHomeStore.com when looking to buy a cheap home
At HUDHomeStore.com (the official website for FHA foreclosures — HUD homes), we couldn’t find homes listed for around $5,000. In White Hall, Illinois, (population 2,520) we found one for around $16,350. The home has three bedrooms and one bathroom in 1,650 square feet. HUD hires inspectors for HUD homes to make sure they in a livable condition. But at that price, you should expect to put in a fair amount of work.
During a cursory search, we found other homes listed in rural areas for less than $20,000. Some of these offer seller financing – which is helpful, since it is difficult to get a mortgage for less than $50,000. There simply isn’t enough profit for the lender who is making that loan. You’ll want to make sure you inspect the home, especially when buying a house for cheap.
Scarce housing stock makes it hard to find cheap homes
Given the scarcity of housing inventory these days, homes in most metropolitan areas are actually selling very quickly with multiple offers. Finding a treasure for a few thousand dollars is extremely difficult. Which is why many people looking for more affordable homes have turned to tiny homes, which typically have between 200 to 500 square feet, and require you to rent or buy a lot on which to put them. Those with smaller budgets also look at mobile or manufactured homes, which can be larger, and more expensive, and also require that you buy or lease a lot.
With more homeowners hunkering down due to Covid and staying in their homes longer, the home improvement industry experienced a surge of demand last year, although demand is expected to fall this year, according to the Leading Indicator of Remodeling Activity (LIRA), released quarterly by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University.
Prices are going up
Prices are going up, in part due to a shortage of building materials but also because there is a shortage of qualified tradespeople. According to a recent story in the Wall Street Journal, lumber costs twice as much as before the pandemic started. Roofing, plumbing, PVC piping and other construction materials have likewise gone up in price. If you’re planning to do a lot of construction, and have only a tiny budget, you may have to phase the work to make it affordable.
To go back to your question, you should look to buy a home near where you get a job. And, if you can work in more rural communities and small towns, and earn a good living, that plus your savings should enable you to get a mortgage at today’s low interest rates and join the ranks of a first-time home buyer. Good luck buying a house for cheap.
©2021 by Ilyce Glink and Samuel J. Tamkin