2006 vs. 2015 is housing “cheaper”

By
Industry Observer with Howard Sumner Consulting

http://www.realestatemontana.com/Blog/comparing-2006-to-2015-real-estate-market-Yellowstone-County

 

 

Time to look back and see where the market has traveled. I use 2006 as a base year for comparison to 2015 since 2006 is the peak year in terms of number of sales in Yellowstone County. The residential market has yet to surpass the number units sold 2006 even though Yellowstone County has more jobs, income and lower interest rates. So let’s take a look back

 

 

 

First here is a quick glance at comparisons

 

When we take a quick look at the drivers of housing, population, employment and income, they all look healthy and in the positive, with the average wage in Yellowstone County showing a stellar performance. When you add in that the interest rate is almost 38% lower than 2006 (6.41% 2006 vs. 3.98% in 2015) that should indicate a stellar growth rate in unit sales. Yet when you do a projection based on where sales were June 30th 2015 (874 units) and where they should end the year (1905 units approximately), as compared to 2043 units in 2006 or138 fewer sales in 2015, said another way 2015 will have 6.75% fewer sales then 2006.

 

As the saying goes “what’s up with that?” possible answers or questions to ask

 

#1 people have decided not to own a home?

 

In 2006 the home ownership rate in Yellowstone county was 72.3% census bureau says 2013 64.87%, so on the surface an argument might be made that this drop indicates a yes answer to the question

 

#2 Yellowstone County has more transient population where they are living and working for shorter period of time then leaving?

 

2015 82.7% of the population in Yellowstone county had been living here at least a year, in 2006 90.02% of the population in Yellowstone county had been living here at least a year. So that shift might indicated more renters moving into the county especially when combined with the information above

 

#3 it is cheaper to rent than own?

 

The average sales priced home ($247,383) with a 30 year fixed rate loan (3.98%) including taxes and insurance runs $1509 a month to own. The average asking price for a 4 bedroom home to rent is $1593 a month. When you consider the tax deduction owning would win over renting.

 

#4 the type inventory of homes available does not match what people want?

 

This is harder to quantify , yet based on income to price ranges  in 2006 median family income  was 92.84% of what was needed to qualify to purchase the average sales price home.

 

in 2013 median family income  was 104.57% of what was needed to qualify to purchase the average sales price home in 2015.

 

Income distribution 2006

 

 

Income distribution 2013

 

 

 

 

 

 

#5 property taxes and insurance are too high in cost?

 

The average sales priced home ($247,383) with a 30 year fixed rate loan including taxes and insurance runs $1509 a month to own. Based on the answers to #3 and #4, I think the answer is no

 

#7 not enough homes for sale?  Comparing total inventory activity (active,pending,closed) 2015 has 10.5% fewer homes than 2006, so yes that could have an impact.

 

year

 

 

2015

 

2006

area 1-10 total listings

617

 

791

 

 

 

 

 

 

area 1-10 total pending

419

 

356

 

 

 

 

 

 

 area 1-10 total closed

1127

 

1272

 

 

 

 

 

 

total inventory

 

2163

 

2419

active,pending closed

 

 

 

 

 

 

#6 credit and down payment requirements are higher than people can meet?

 

With the income increase, essentially a flat cost on a monthly basis to own and the increase in people employed, my belief this is the main deterrent to purchasing a home.

 

This would especially be true when you look at the increased cost of renting has matched the percentage increase in income over the time period in review.

 

comparing  each year

07/15/2015

 

 

%

 

2006 Market

2015 market

up / down

 

138,535

157190

13.47%

population

 

 

 

county

77278

80528

4.21%

Employed

 

 

 

Average

 $     33,364

 $      44,090

32.15%

wage

 

 

 

 

2043

941

-53.94%

#of sales

 

 

 

30 year

217

193

-11.06%

permits

 

 

 

single family

6.41%

3.98%

-37.91%

fixed %

 

 

 

average

 $   191,850

 $    247,383

28.95%

sales price

 

 

 

average 

 $       1,513

 $        1,509

-0.26%

PITI

 

 

 

median

 $   169,000

 $    225,000

33.14%

sales price

 

 

 

median 

 $       1,340

 $        1,367

2.01%

PITI

 

 

 

consumer

199.3

237.805

19.32%

price index

 

 

 

 

 $       1,201

 $        1,593

32.64%

4 bed house

 

 

 

for rent

 $          646

 $          851

31.73%

2 bed gr apt

 

 

 

for rent

805

$1,158

43.85%

avg house

 

 

 

for rent

558

755

35.30%

avg apartmnt

 

 

 

for rent

 

Comments (3)

Troy Erickson AZ Realtor (602) 295-6807
Good Company Real Estate - Chandler, AZ
Your Chandler, Ahwatukee, and East Valley Realtor

Howard - You have done an excellent job explaining where the market was in 2006, and how it compares now. It is obvious that there are reasons why home sales are down, even though interest rates are as low as they have ever been.

Jul 22, 2015 07:19 AM
Nicole Doty - Gilbert Real Estate Expert
Zion Realty - Gilbert, AZ
Broker/Owner of Zion Realty ZionRealtyAZ.com

Nice job with this Howard. It's a lot of information to comb through but you've made the comparisons easy to follow!

Jul 24, 2015 12:51 AM