For many, a huge part of growing up and being successful includes owning a home of your own. Of course this is no easy feat since it often requires years and years of dedicated saving to make a down payment and continue paying for the home. But sometimes you don’t have to save quite as much, depending on where you’re looking. For the third year, SmartAsset ran the numbers to find the best states for homeowners.
To find the best states for homeowners, we took a look at a few metrics. We wanted to find states that were affordable and that had solid housing markets. We looked at various costs of owning a home like property taxes and closing costs. This way we’d get a more comprehensive look at which states would be the best for homeowners. Note that due to a lack of data, Kansas was not included in this year’s study.
Key Findings
- The Midwest passes the test – Midwestern states took over our top 10 this year with six states representing: South Dakota, Minnesota, Nebraska, North Dakota, Michigan and Wisconsin. Western states comprise the rest of the top 10.
- Bottom of the list remains stagnant – We saw a lot of movement within the top 10, with states moving up and down the list compared to last year. However, states like New Mexico, Connecticut and New Jersey remain at the very bottom of the list.
This SmartAsset’s third annual study looking at the best states for homeowners. Check out last year’s study here.
1. South Dakota
This year, South Dakota takes the crown by unseating last year’s champ Wyoming. South Dakota outshines the other states by scoring high in basically every metric. For starters, the state has the second-lowest average closing costs and the third-lowest number of foreclosures overall.
The Mount Rushmore State’s numbers indicate affordability and comfort. It ranked 12th-lowest for median-home-value-to-median-income ratio, average homeowner’s insurance and burglary rate.
2. Idaho
The Gem State lands one spot higher than it did last year, impressing with the lowest average annual homeowners insurance in the study. The state’s foreclosure numbers and burglary rate dipped from last year, boosting Idaho’s appeal to homeowners looking for stability and safety. The average price per square foot also saw a nice drop to $116, offering more affordable choices especially paired with the low median annual property taxes in Idaho.
If you’re going to buy a home in Idaho, you may want to watch out for high closing costs, though. The state has the second-highest average costs compared in the top 10. When looking at the ratio of the median home value to median income, Idaho has the third-highest out of the top 10.
3. Colorado
Colorado rounds out our top three best states for homeowners, making its way up from the sixth spot last year. Homeowners will be happy to know that the property tax rate in Colorado has gone down, ranking as the fourth-lowest rate overall and the lowest in the top 10. Median annual property taxes are up slightly but still score as the third-lowest in the top 10.
To the opposite, the Centennial State does have some of the highest numbers in the top 10. Its average price per square foot and burglary rate overshadow the other top 10 states. The price per square foot is even the fourth-highest overall. Colorado is seeing fewer foreclosures than last year, although it maintains the 14th-highest overall ranking in that metric.
Related Article: 529 Plans in Colorado
4. Wyoming
The Cowboy State has fallen to the fourth-best state for homeowners, having previously held the number one spot in 2015 and 2016. What may have contributed to Wyoming’s drop is the higher average closing costs its residents are seeing, plus average scores across the board when compared to the top 10.
However, Wyoming’s numbers were still able to keep it in the top five. Standing out is the state’s burglary rate, coming in as the fifth-lowest rate overall and the best among the top 10. Wyoming residents also pay the lowest average property taxes when compared to the other top 10 states. Overall, Wyoming ranked eighth in both foreclosures and property tax rate.
5. Minnesota
Minnesota rose two spots to rank as the fifth-best state for homeowners. The state is seeing fewer foreclosures this year, ranking sixth in the top 10 and 12th overall. The state also ranks sixth in the top 10 in the median-value-to-median-income ratio, property tax rate and average closing costs.
On the other hand, the North Star State saw a hike in a few metrics. Average price per square foot saw an increase, landing as the 13th-highest overall. Average closing costs went up, too, ranking 12th overall. Minnesota homeowners are also paying the most in average homeowners insurance and the third-most in average annual property taxes out of the top 10 states.
6. Nebraska
Nebraska is a newcomer in the top 10 this year, up from the 14th spot last year. This is due to improved numbers in a few different metrics. The average price per square foot has gone down to a mere $109 and the median-value-to-median-income ratio is the second-lowest overall. Potential Nebraska homeowners can look forward to the 10th-lowest burglary numbers, which have seen a solid decrease from last year, a low number of foreclosures and some of the best public schools in the country. Average closing costs did see a slight increase, however Nebraska still ranks sixth-best in that metric.
The Cornhusker State saw a dip in its property tax rate although it still remains pretty high, ranking as the second-highest in the top 10, after Wisconsin. Nebraska homeowners also pay the second-most in median annual property taxes compared to the rest of the top 10.
7. Utah
Down from the fifth spot in last year’s study, a look at Utah’s numbers can show you why. In almost every metric, Utah saw a change in numbers for the worse. The average price per square foot saw an increase and landed as the 12th-highest overall. The median-value-to-median-income ratio increased, too, as did the number of foreclosures, now the highest number in the top 10.
Not all changes are detrimental, though. For one, although the average closing costs saw an increase of about $200, Utah still boasts the fifth-lowest closing costs overall. Utah homeowners might be paying slightly more in median annual property taxes, but the property tax rate is still the 10th-best overall. Utah homeowners also get the third-lowest average homeowners insurance payments.
Related Article: 529 Plans in Utah
8. North Dakota
Down from last year’s number four spot, North Dakota also took a hit due to some less-than-beneficial changes in its numbers. For one, the average price per square foot in North Dakota increased becoming the eighth-highest overall and the second-highest in the top 10. Not only will the size of a home cost you, but so will closing the deal, with average closing costs coming in at $2,049. That’s the highest in the top 10. Homeowners insurance may also take a chunk out of your wallet since North Dakota has the highest average numbers in the top 10, second only to Minnesota.
However, the Peace Garden State outshines all others by having the lowest number of foreclosures per 10,000 homes overall.
9. Michigan
Michigan made its way to the ninth spot this year from last year’s 16th place. The Great Lake State moved its way up by ranking well across the board, but standing out most with the lowest average price per square foot in the top 10. Michigan’s median-home-value-to-median-income ratio ranked seventh-best overall, furthering its affordability.
Additionally, the number of foreclosures per 100,000 homes decreased, landing in the 13th ranking. This may make the Michigan housing market more appealing. Even with an increase in average closing costs, Michigan still ranks 13th in the metric.
10. Wisconsin
Wisconsin redeems itself from coming up just short of last year’s top 10 (it ranked 11th) by rounding out our list this year. The Badger State showed improved numbers when it comes to affordability. It stands out by having the third-best overall numbers for average closing costs and the fourth-best overall numbers for average homeowners insurance costs. If you’re looking to buy a home in Wisconsin, you’ll be happy to know that the price per square foot also decreased slightly, landing as the third-best in the top 10. The burglary rate fell too, ranking 11th overall.
On the whole, Wisconsin’s numbers improved enough to boost it into the top 10. Despite some of these changes, though, the state couldn’t quite compete with the rest of the best states for homeowners. There are fewer foreclosures this year, but it’s still one of the highest numbers in the top 10, second only to Utah. Wisconsin also holds the highest property tax rate and median annual property taxes in the top 10.
Data & Methodology
In order to find the best states for homeowners, SmartAsset looked at homeowner data for all states except Kansas due to a lack of data. We ranked each state according to the following metrics:
- Average price per square foot. This metric provides the average price of a home in each state to help determine affordability. This data comes from Zillow.
- Price appreciation. Using the numbers from the above metric, we looked at the change in home values between 2015 and 2016. This data also comes from Zillow.
- Median-home-value-to-median-income ratio. To further demonstrate a state’s affordability, we looked at how the median household income compares to the median home value. Both numbers come from the U.S. Census Bureau’s 2015 American Community Survey (ACS) one year estimates.
- Foreclosures per 10,000 homes. To get a better idea of a state’s housing market climate, we included data on foreclosures. This data comes from RealtyTrac.
- Property tax rate. We looked at each state’s property tax rate. This data comes from the U.S. Census Bureau’s 2015 ACS one year estimate.
- Median annual property taxes. Further, we looked at the average amount residents in each state pay in property taxes. This data comes from the U.S. Census Bureau’s 2015 ACS one year estimate.
- Average closing costs. These numbers offer a look at the average amount residents in each state pay in closing costs. This data comes from Bankrate.
- Average annual homeowners insurance. Another cost homeowners must consider is homeowners insurance. The numbers reflect ValuePenguin data from 2013.
- Burglary rate. To include a safety metric, we pulled burglary numbers for each state. The numbers represent the average rate per 100,000 people. These numbers come from the Federal Bureau of Investigation.
We began by assigning each metric a certain weight. We gave half weight to property tax rate, median annual property taxes, average closing costs and average annual homeowners insurance. All other factors received full weight.
We then ranked each state according to each of the nine metrics and averaged those rankings. Each state received an overall index score based on these rankings. The highest scoring state earned a 100, while the lowest earning state earned a score of 0.
The data analysis for this study was completed by Nick Wallace.
Questions about our study? Contact us at press@smartasset.com.
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