Tuesday, December 22, 2009

Oklahoma Home Prices

I recently got into a heavy discussion with someone on a message board regarding house prices in my home state of Oklahoma. His contention, having lived here earlier in his life, was that homes in Oklahoma were FAR overpriced relative to their true values — that the "median home price / median income" multiple here was at 10x or more. My argument was that this was not the case, and that home values here weren't far outside any affordability metrics of which I was aware.

Historically, I've been told, home prices tend to fluctuate in a range of 3 to 5 times an area's median household income. Here's an article that discusses that ratio:

newgeography.com: Improving Housing Affordability

In it, we're told:

Our measure of housing affordability is the “Median Multiple,” which is the annual pre-tax median house price divided by the median household income. Over the decades since World War II, this measure has typically been 3.0 or below in all of the surveyed nations and virtually all of their metropolitan areas, until at least the mid-1990s. There were bubbles before that time in some markets, but during the “troughs” most markets returned to the 3.0 or below norm.

So where does this put Oklahoma?

Well, according to the U.S. Trustee Program / Department of Justice, Oklahoma's median income for a one-person/one-earner household is $38,244 (as of May 2009). (Such figures would be applicable to bankruptcy courts, and regularly updated, obviously, since how a BK filer's income compares to his/her state's median income forms a primary basis for how the debts are treated in court.)

Census.gov shows Oklahoma's median income, as of 2005, to have been $39,292, though we don't know if this was for one-, two-, or more-earner households ... or for some combination thereof.

Now for home sales: According to Housingtracker.net, the median listing price for Oklahoma City homes (they don't show a statewide figure) as of December 21 was $157,900.

For a second source, MLS shows Oklahoma's median home sales price to be $122.5k as of October 2009.

So if we divide the MLS median sales price ($122,500) by the DOJ's median income figure ($38,244), we get a housing-price ratio of 3.2 for Oklahoma. This is well within historical norms, and certainly FAR away from the 10x ratio my fellow poster was suggesting.

(For those interested, the same calculations would put California at a ratio of 5.2, utilizing a median income of $48,140 and a median home sales price of $250k.)

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— Posted by Michael @ 8:15 AM


Funny, I was just thinking that California must be way higher, and then I came to it at the end of the article. Seems like the cheapest houses around here are around $400k...


3-5 times annual income?!? I thought traditionally the number was 2-3 times annual income.

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