When thinking about the question of housing cost, the question of which is the most important to the consumer, is it the purchase price or is it the monthly payment. While I would not claim that it is absolutely one way or another, generally speaking, my experience is, that monthly cost tends to be the deciding factor in decision making process and yes the purchase price does drive the monthly cost along with interest rate , taxes and insurance. I thought it would be of interest to look at the market in terms of price range and the most probable monthly payment in the different price segments comparing 2006 which the peak year in sales in Yellowstone county to the current year 2013.
This first graph shows the moderately priced homes and estimated PITI. When you look at the overall cost per month it has basically dropped 21% from 2006 to 2013 purchasing the same priced house. Additionally at the $170,000 level in 2006 you would have needed $57,471 in income to qualify to purchase and in 2013 your income need to be only $45,214 or about $12,000 less.
This second graph shows the higher priced homes and estimated PITI. When you look at the overall cost per month, again it has basically dropped 21% from 2006 to 2013 purchasing the same priced house. Additionally at the $350,000 level in 2006 you would have needed $118,328 in income to qualify to purchase and in 2013 your income need to be only $93,085 or about $25,000 less.
This third graph shows the average and median sales prices per Sq. Ft.. When using this measurement it takes away the distortion of looking solely at the gross selling price and lets you most closely compare apple to apples. This metric tell average sales cost are 16.43% yet the cost to finance that purchase has dropped by 7.93%. Compare that to the income qualification using just sales price which shows a 21% drop to purchase the same priced home. The bottom line is this means you purchase the same home and it costs you about 8% less than it did in 2006. Pretty amazing when you think about it.
This fourth graph shows the average and median sizes that sold. This shows that the size of a home has increased by 5.17%. So the consumer is responding to their ability to buy more and have it cost them less. pretty amazing stuff to think about
This last graph tracks the average and median monthly PITI by year and interest rate to show that aspect of market performance.
Hopefully this information both useful and interesting to you
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