The Most Affordable Cities in America

Forbes

Billionaire Warren Buffett has made Omaha, Neb., synonymous with savvy stock investing, but the city is also highly attractive for those seeking an affordable lifestyle. In fact, the Midwestern metro ranks No. 1 on our Best Bargain Cities list.

What do we mean by a bargain? The Merriam-Webster Dictionary defines it as an "advantageous deal." On that score Omaha qualifies, thanks to a list-leading combination of affordable real estate and a healthy ratio of income to living costs.

To compile our bargain city list, we started with the 50 largest U.S. Metropolitan Statistical Areas (MSAs) and then compiled a mix of data aimed at handicapping the overall affordability of living in each.

In Pictures: America's Most Affordable Cities
In Pictures: America's Most Affordable Cities

We looked at the current median asking price of homes on the market in each city, using data from Altos Research, a San Francisco-based real estate research firm. We got the median salaries of workers with bachelor's degrees or higher from PayScale.com and compared it to a cost-of-living index from Moody's Economy.com (the cost-of-living index factors in transportation, insurance, food, utilities and other factors). Finally, we factored in the latest unemployment rates from the Bureau of Labor Statistics to reflect the relative strength of local economies.

The result is a list of the top 15 urban affordability hot spots.

Omaha Stakes

As the home of major corporations like Union Pacific, ConAgra Foods and Warren Buffett's Berkshire Hathaway, Omaha boasts inexpensive real estate, a low cost of living and an unemployment rate little more than half the national average.

Most Affordable Cities: Omaha, Neb.
No. 1 Omaha, Neb.

Omaha's job market will actually grow by 1.6% in 2011, according to Moody's Economy. In fact, the Nebraskan hub will be a "city that thrives in 2011," adds online real estate database Trulia.com.

"Its home prices have stayed steady through the recession, owing to the fact that they never saw the inflation of the bubble era," explains Tara-Nicholle Nelson, consumer educator for Trulia.com. "In Omaha, it seems to be steady as she goes."

The Midwest dominated our bargain city list. Other heartland metropolises offering good deals include Indianapolis, Ind. (No.4); Minneapolis-St. Paul, Minn. (No. 7); Oklahoma's namesake city (No. 9) and Tulsa (No. 15); and Ohio's three largest metros, Cincinnati (No. 5), Cleveland (No.8) and Columbus (No. 13).

Most Affordable Cities: Buffalo, N.Y.
No. 2 Buffalo, N.Y.

Indianapolis, Kansas City and Ohio's three enclaves have real estate deals available at low price points. Although Oklahoma City and Tulsa offer some of the lowest median salaries among the 50 MSAs ranked, their home costs are also near the bottom, making both cities highly affordable.

At $249,000, the current median asking price for homes in Minneapolis-St. Paul remains higher than those of its neighbors on our list. The Twin Cities make up for it in quality of life, touting low unemployment rates and a healthy cost of living vs. salary.

"Minneapolis-St. Paul has very strong institutions of medical research and higher education, a highly educated population and a desirable amenity base," says Stuart Gabriel, director of the Ziman Center for real estate at the University of California Los Angeles.

"Minneapolis has weathered the downturn better than most places and its prospects continue to look relatively bright," says Gabriel, who has researched the quality of life as it relates to real estate economics.

Motor City ... Rocks?

Surprising but true, Detroit, the Michigan metro known best for cars, crime and urban decay, took third place on our list.

Most Affordable Cities: Detroit, Mich.
No. 3 Detroit, Mich.

Detroit is a rough place with a staggering 13.3% unemployment rate and a high per capita crime rate, according to Federal Bureau of Investigation data. Its foreclosure rate is among the 10 highest in the U.S. There were 45,000 Real Estate Owned (REO) residences in the Motor City as of last November, according to online foreclosure site RealtyTrac.

That said, if you have a college degree under your belt and a steady job to show up to, your money gets great mileage in Detroit. The median salary for degree-toting workers is $60,600 (15th out of the 50 cities) while the cost of living remains super cheap (second out of 50).

With a median asking price of $132,635, Detroit homes are dirt-cheap. Gabriel warns that "the low house prices in Detroit are no accident. They're a reflection of depressed land values, depressed amenities, depressed employment."

In other words, don't expect this overall housing market's value to rise anytime soon. Some experts believe it may even depreciate further in 2011. Detroit is a deal only for stably employed residents looking to buy a long-term home.

Most Affordable Cities: Indianapolis
No. 4 Indianapolis

Couple that with a blossoming arts community and the tentative hope that Detroit's auto industry is resurrecting itself, and this city is a haven for pioneering bargain-hunters.

Other metros ripe for a homemade deal? The Northeast blue-collar hubs of Buffalo, N.Y. (No. 2) and Pittsburgh, Pa., (No. 6); southern belle, Raleigh, N.C., (No. 11); and two Lone Star cities, Houston (No. 10) and Dallas (No. 14).

Most Affordable Cities: Cincinnati
No. 5 Cincinnati

Five of America's Most Affordable Cities

Omaha, Neb.
Asking Price Rank: 9
Salary Rank: 43
Cost-of-Living Rank: 5
Unemployment Rank: 1

Buffalo, N.Y.
Asking Price Rank: 2
Salary Rank: 47
Cost-of-Living Rank: 1
Unemployment Rank: 12

Detroit, Mich.
Asking Price Rank: 1
Salary Rank: 15
Cost-of-Living Rank: 2
Unemployment Rank: 48

Indianapolis, Ind.
Asking Price Rank: 7
Salary Rank: 31
Cost-of-Living Rank: 4
Unemployment Rank: 24

Cincinnati, Ohio
Asking Price Rank: 4
Salary Rank: 25
Cost-of-Living Rank: 6
Unemployment Rank: 32

Click Here To See the Full List of America's Most Affordable Cities

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