Does it "cost" More to buy a home today?

When I review the market in Yellowstone county I always try and think of different ways to look at what happens both long term and short term.

With that in mind it prompted me to ask the subject line question. And there are many ways to answer the question, your point of view may determine your answer.

Let’s look at the information on Yellowstone county since 2006, since it was the peak year in sales and we have not reached that level again and most probably will not reach that level of unit sales in 2014 either.

First let just look at both the average and median sales price and see what kind of answer that provides.

Looking below the average sale price shows an increase of 23.78% and a dollar increase of $45,640 as a home owner pretty impressive as a buyer maybe not so enticing.

The Median sale price shows an increase of 26.84% and a dollar increase of $45,607 again as a home owner pretty impressive as a buyer maybe not so enticing. The one thing that tells the market change has been broad throughout the market since median and average are close to the same change

Another way of looking at the “cost” of housing if the price per square foot. This shows the price has gone up 22.8%or about 15.05% less than the median gross dollar shows. Still impressive yet shows a little different answer.

So the next question is what about size? This shows the median size of a home sold since 2006 has only increase 3.29%, which I believe based on the first two charts would lead us to the answer that housing is costing us more.

Of course most do not pay cash, most of us finance our purchase of homes. Then questions is what does the financing option show. The chart below shows an approximation of what the payment would be on both the average and median sales price homes with taxes and insurance figuring a “mythical” 100% financing, which is close to true, in a FHA loan, the borrowed amount with the minimum down very closely approximates the purchase price. Well by that standard since 2006 the cost of an average  monthly payment has declined  by $26 dollars a month pretty neat deal. Of course if you look at the bottom of the interest rate decline, the average monthly payment shows and increase of $211 or an increase of 16.53%.  which is a perfect illustration of

 “is the cup half empty or half full”.

The last measurement you may wish to look at is how much inflation has been since 2006. The consumer price index shows  the general price level has gone up by 18.14% since 2006, or said another way, The house payment that has dropped by $26 a month you are actually paying with dollars’ worth only .84 cents meaning the $1487 is being paid back with the equivalent of $1258 in 2006 dollars……………….

Some thoughts to ponder on this day