I think most of the country, out of the insane real estate places like San Francisco, New York City, Silicon Valley, Southern California, and parts of Boston, $165K will get you a very nice house. An ex-co-worker of mine in El Paso bought a house for $40,000, with a very little lawn, but three bedrooms, two bathrooms, a two-car garage, etc. It was a new house, too. A fun thing I like to do is get out my address book, and go on the Wells Fargo "How much is this house worth" calculator. You put in any address and they give you their best estimate of how much the house is worth at the moment. So I can see that the smallish house in Chevy Chase, MD that my friends have with three small bedrooms is about $600,000, whereas my friend's house in El Paso with five bedroooms, living room, dining room, sun room, and den on an acre lot in the best school district in town is about $270,000. (My friends from Austin and I, when we're in El Paso, like to read the ads in the paper for houses for sale to each other, and then guess how much the place costs. Or look at the price and try to guess what the house has. We're so off it's funny. We saw one place for $600K and we thought, Ah-ha! but it turned out to be an apartment building with ten apartments for sale.)Another thing to realize is that rent may be high in the areas where houses are expensive, so it may make more sense for people to buy than rent. A three-bedroom apartment in my area is $1800-$2100/month, which is a $270K to $310K mortgage at 7% interest. Of course, that does not include PMI or taxes or anything like that, but still, if you have enough people that you need three bedrooms, well, the median house price around here is $320K, so it's close to making sense. --Booa
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