To cut costs, move to small-town USA

Turns out the ultimate budget weapon may be a U-Haul. These families relocated to areas where homes and daily life cost far less.

By Liz Pulliam Weston
Real estate prices are stalling or even declining in some high-cost cities, but buying a home in a decent neighborhood is still just a dream for many middle-class families.

You can try stretching your finances to the bursting point or gambling on a less-desirable neighborhood. Or you can consider doing what many families have done: decamp to somewhere the cost of living makes more sense.

After all, where you live is probably the single biggest factor on your finances. A box of cereal costs pretty much the same everywhere, but a median-priced home ranges from under $100,000 in places such as upstate New York to well over $700,000 in parts of California.

A house payment one-seventh the size is tantalizing. There's a lot more to the decision than that, of course. The families you're about to meet fled the big city for very different reasons.

Making Idaho home
Home prices in Portland, Ore., aren't as outrageous as in some other West Coast cities, but the $270,000 median would have been a stretch for Darrin, a 41-year-old prison guard, his stay-at-home wife, Jennifer, 33, and their four children, ages 4 to 10. Darrin had the choice of transferring to another correctional facility, so after some research, the family chose to move to a small town in Idaho. He commutes across the state line to Oregon, a journey that takes less than an hour.

The home they bought for $169,900 is relatively small -- 1,400 square feet -- but would have cost twice as much in Portland, Jennifer said. Overall, she said, the move to a cheaper area was like getting a 12% pay raise.

"The costs of utilities, medical and transportation are less," Jennifer said. "The move allowed us to buy a home and allows me to continue to stay home and raise our children. The added benefit is that there is hardly any rain, (there are) definite seasons and the area is very family oriented."

The big downside: They're a 10- to 12-hour drive away from their families. They would love to be closer, Jennifer said, but the benefits of their country life far outweigh that disadvantage. "We're staying," she said.

Almost heaven, West Virginia
Rich and Penny Judd actually owned a small home in a Baltimore suburb, but in 1999 decided they wanted a bigger place to raise a family. Rich needed to be close enough to commute to his government job, so he drew a circle on a map with his workplace at the center.

"I looked on a map to see what was about an hour's drive from my workplace and noticed Harper's Ferry, W.Va., was within the 60-mile radius I drew," Rich Judd said. "So we went out to West Virginia to see what housing prices were like."

Video: How much house can you buy?
The Judds made their minds up pretty fast. At the time, Rich explained, land was selling for about $8,000 an acre, compared with $90,000 in Maryland and $30,000 to $40,000 in the bigger suburbs where the couple had originally planned to look. They bought a "beautiful" house with a pool on 6.5 acres for $191,000, a place "we never would have been able to afford in Maryland," he said.

Home prices have risen in the area as others have caught on, so the Judds have made some money buying, fixing up and selling various properties. Now they're looking into homes in farther-out areas that haven't had the same run-ups in values, hoping for more bargains.

The Judds don't think the schools that their three daughters attend are quite as good as those in the area they left. But they also note that their girls, ages 7 to 11, and their girls' friends don't have the premature sophistication of city kids; as Rich Judd puts it, they're not "growing up too fast."

The area where the Judds live has fewer entertainment and shopping options than the suburb they left, but Rich Judd said the family doesn't miss those much.

"In short, (there is) not really any downside to speak of for a baby-boomer couple with three young kids," Rich Judd said. "Maybe when we were younger and pre-children it would matter more, but that's probably why we didn't move earlier."


Finding the right compromise
After losing his dream job in the 1990-1991 recession, Rob Bennett made financial independence his goal. A former reporter covering tax legislation on Capitol Hill, Bennett took a corporate job "for the money" and started saving as much as he could. He and his wife, Mary, paid off the $148,800 mortgage on their Arlington town home in four years while researching small towns where they could live inexpensively.

Blowing Rock, N.C., was an early favorite but was too far away from Bennett's elderly parents. So the couple settled on Purcellville, Va., population 5,000. They sold their town house for $260,000 and paid $220,000 cash for their Purcellville home in November 2001, shortly before the birth of their second son (the boys are now 7 and 5). Bennett left his corporate job and became a self-employed writer.

"Most of our basic costs have either been eliminated . . . or are covered by earnings on our investments," said Bennett, 50, who wrote a book about his experiences called "Passion Saving: The Path to Plentiful Free Time and Soul-Satisfying Work" and who runs the PassionSaving.com Web site. "So the amount that I need to earn on the writing business is small."

Technology helps make up for what Bennett sees as Purcellville's two big deficits: no movie theater or bookstore. Netflix and Amazon.com help fill in the gaps for his family, he said, but others may miss city entertainments and conveniences more.

"People seeking to make this sort of move need to think through each aspect of their daily lives," Bennett said, "to make note of what conveniences of a larger town they will miss."

Bennett also notes that there are some tensions between longtime residents and the more educated, affluent families (like his own) that have discovered Purcellville in recent years.

Before you start packing
If you're considering a move to a more affordable area, the following suggestions may help you decide whether to move and where to go:

Do your research. Bennett's bookshelf includes "The 100 Best Small Towns in America" by Norman Crampton, "The Rating Guide to Life in America's Small Cities" by Kevin Heubusch and G. Scott Thomas and "Moving to Small Town America" by William Seavey. The Internet can help you sort through the possibilities as well.

Crunch the numbers. What you'll pay for a house is just the start. Find out what you'll pay in taxes -- on income, sales, property, business -- as well as for utilities, food and other basics. Cost-of-living calculators like this one at Sperling's Best Places can give you a general idea of how far your income will go in a new area, but you may need to do some on-the-ground research for smaller communities.

Video: How much house can you buy?
Don't forget transportation costs. If you'll be driving longer to get to work, you'll have to weigh whether that time and cost is worth a lower home price, said Brad Stoh, co-CEO of Bills.com. "And if you move far from family but end up with frequent air trips back to visit aging parents," Stoh said, "those costs must be considered."

Investigate the local economy. What happens if you lose your job? Could you get another one without moving again? All things being equal, an area with a robust economy is usually a smarter choice than one that's moribund or dependent on a single employer.

Consider the trade-offs. Many areas with lower housing costs experience slower appreciation than higher-cost cities. If the area you choose grows rapidly, on the other hand, it may suffer the kind of growing pains -- congestion, crowding, higher taxes, crime -- that you were trying to escape by leaving the city.

Activities: The smaller the town, the fewer the opportunities for shopping, dining and indoor recreation, although the outdoor recreation possibilities may be far greater.

Culture: I'm not talking about symphonies and opera here, but rather the "feel" of a place and how welcoming it is. No matter who you are or what you're into, you can always find kindred spirits in a big city, but that might not be true in a smaller place, which tend to be more homogenous. Small towns and rural areas can be particularly lonely if you're single or your political views or lifestyle are out of step with the area's mainstream. The only way to really know is to go and check it out yourself, preferably with an extended visit, before you decide to move.

Liz Pulliam Weston's column appears every Monday and Thursday, exclusively on MSN Money.