Finding the right home at the right price continues to be a problem for house hunters across the country—the supply of available homes is tight, and as the economy improves, demand is only increasing. Prices are going up, and we expect that soonmortgage rates will, too.
So what’s a price-conscious would-be homeowner to do If you don’t live in one of the nation’s pockets of affordability, you might consider buying a place that doesn’t quite meet your needs—yup, a fixer-upper—thenturning it into your dream home.
“The fixer-upper strategy, honed and popularized by the ‘Property Brothers’ of HGTV fame, is a viable way to address your home needs while being realistic about what you can afford,” said Jonathan Smoke, our chief economist. Plus, you get the opportunity to personalize your home—and increase the value of your investment.
“This strategy is better suited to areas with a good supply of older homes, which need more TLC,” Smoke said. “It could be a good approach for millennials, who tend to prefer urban or near-suburban areas but are constrained by what they can afford.”
To find locations with the best prospects for getting an edge in the market, Smoke’s team analyzed the 513,506 listings for midsize single-family homes on our site in March. By limiting their search to homes of 2,000 to 4,000 square feet whose descriptions included keywords such as “fixer,” “as is condition,” “with potential,” “handyman,” or “TLC,” they identified 7,242 homes as fixer-uppers.
Then they figured out which areas have a greater supply of fixer-uppers, and where those homes cost substantially less than a comparable home that is move-in ready. We’re calling that price differential the fixer discount. They used that combined with the availability of fixer-uppersto calculate the Fixer Score for each county. Philadelphia, PA; Lake, IN; and Marion, IN (home of Indianapolis) were on top of the rankings for fixer-upper potential.
Counties with a score closer to 100 are more likely to have larger fixer discounts and more fixer listings available. The counties listed here have a minimum of 20 fixer-upper listings and a minimum median fixer-upper discount of 40%.
While the above graphic shows top counties for fixers, we also looked at the relationship between discount andsupply in large metro areas. At one end of the spectrum, we found that Cleveland, OH, has a relatively high supply of fixers but a low discount, so that discount may not be worth it. At the other end, Chicagohas high discounts but low supply—so those fixers are worth it, if you can find them.
The metro areas described here cover multiple cities and represent Core Based Statistical Areas as defined by the U.S. Office of Management and Budget.
In some markets, buying a fixer can really be a game changer, bringing the typical single-family home into reach for a median-income household. Out of the 233 metros that our economic team analyzed, only 25 had midsize, move-in-ready single-family homes that were affordable for a household earning the local median income (where half the people are making less and half are making more). In 144 markets, though, a comparable home theoretically becomes affordable if purchased as a fixer.
That happens in places such asAtlanta,Chicago,and Dallas,where fixer savings can start to be meaningful. However, that still leavesplaces where even typical midsize fixers remain out of reach of the median household, including the large and diverse Miami, New York,and Los Angeles.
Top 10 metros where buying a fixer makes a difference
These are the largest metros where fixer homes are well within reach of the median household, leaving enough financial room forimprovements (at least 20% of purchase price is still left in their pockets).
Depending on your location, your financial situation, and—yup—your handyman skills or contractor connections, buying a fixer-upper could be a good solution for a tough-to-crack housing market.