On Sunday, December 14th in the World Section of the Argus Leader, Dennis Cauchon wrote an article “Recovery could take decades.” The title doesn’t necessarily reflect what I received from the information. In case someone missed it, a review of the full article would be a good idea. I found Dennis’ final thought about often used “three common sensed and historic measures” for home values, right on.
I have not found or heard a better explanation. He referred to the three measures as income, rent and appreciation.
Income as related to values in my opinion is an excellent method, not only for houses but for most everything. Dennis noted that home values have floated in the range of three times the average household annual income during the 1950-2000 period. Not so during the 2002-2006 timeframe which was substantially higher. He also noted that homes appreciated about half of 1% per year after adjusted for inflation from 1950 through 2000. During the timeframe of 2000-2006 the national annualized appreciation was considerably higher at 8.2%. It’s no wonder why prices have dropped so drastically this past year or so, markets tend to cycle into average returns over time.
These numbers reflect the national as a whole, the good news for us in the Sioux Empire is we didn’t have a huge run-up in prices and values have followed the three historic measures.
For those people wondering if home values here are solid or not, they can look at the facts.
As of July 2007, the estimated average household income in Sioux Falls was $46,938. The estimated median home value was $141,700. The ratio is 3.02%. Home values peaked in 2006. Comparing year 2000, income was 41,221 and median home value was 97,300. A ratio of 2.36%. Incomes increased 13.95% while home values increase 45.6%.
One of the primary reasons Sioux Falls experienced a housing boom since 2000 was largely due to affordability. As you can see the 2000 numbers were conservative by historic standards. Lower interest rates and population growth of 19.6% were also contributing factors.
The conclusion is Sioux Falls did not have large annual increases, and the increases we had were mostly attributed to lower interest rates, growing population and better affordability. One last thought. The city continues to grow, and in comparison to the nation it looks like a haven for many looking to relocate. Unemployment is only 3.2% and 10.9% of the population is classified in poverty. By historic standards, all is well in our city and the future looks bright.
Interest rates are exceptionally low, in the 5% range for a 30-year conventional loan – that’s only $1070.06 a month for interest and principle on a $200,000 mortgage.
Time is ideal for selling the smaller home and getting one that better fits your lifestyle.