Thursday, February 23, 2017

Oregon Economic Forecast: Home Prices Up 34% in 5 Years, Wages Lag at 22%; My Portland Example Shows Impacts.

The release yesterday of the latest Oregon Economic Forecast included an "other indicators" table of other data with wage and housing price forecasts. 

I created a Portland based example to see how the assumptions for home price and wage increases would play out IF:
  1. 2017 starting price at median PDX home price of $350,000.
  2. Down payment of 20%.
  3. Interest rate of 4.25% (remains constant).
  4. Tax and insurance rate of 1.25%.
  5. 30% of income for PITI. 
  6. Qualifying income is $69,681.
  7. Assumed family income is just enough to qualify at $70,000. 
The table pasted below shows the results:
  1. Home Price increases by 34% as does down payment.
  2. Down payment jumps to $93,690 
  3. Wages increase by 22%. 
  4. Family starts out with just enough to qualify but at end of period their $85,744 inflated income is 8% ($7,519) below the $93,262 required to qualify.

Note: IF interest rate increased to 5% in last year, qualifying income would jump to nearly $100k ($99,990) and gap between qualifying income and family income would grow to 14%/$14,246.

Biggest take away for me is that both income AND down payments will grow as obstacles to increasing home ownership.  

My editorial observation is that policies like limiting the state MID for higher income families can help focus redirect more financial support at the entry level and can be part of a broader effort to both increase home ownership and help lower income renters.

Originally created and posted on the Oregon Housing Blog.

Monday, February 13, 2017

Updated: All Data from New HUD Picture of Subsidized Housing Report Consolidated in Two Excel Files.

Update: I added a US Total worksheet and pivot table to the 1st file. 
Last Friday HUD released the 2016 version of the HUD Picture of Subsidized Households

There are multiple geographies that can be chosen to display this data; HUD has a useful tool to allow you to drill down to specific programs and geography HERE.  

I went in a different direction and downloaded and combined these geographies and added and created two (large) Excel files in MS One Drive that allow a user to view 7 8 different geographies from within two files (and also project level data in the second file). 
  • The first Excel file HERE (38MB) contains US, state, congressional district, CBSA, PHA, county, and place level work sheets and pivot tables for each. Pivot tables are set by default to Oregon, when the state field is available. This is easily changed to allow selection of another state or to show data for multiple states.
  • The second Excel file HERE (74MB) contains two worksheets for Census Tract level files and a worksheet for project level data. The file is large enough that Pivot tables are somewhat impractical, instead you can filter the data to drill down to the levels and data of interest. The default filter is set to display Oregon data. 
The image below shows the field listing for the data available in these files. The data dictionary is available from HUD HERE.

Originally created and posted on the Oregon Housing Blog.

Monday, January 23, 2017

Reported Avg/Median PDX Rents are All Over the Place. Zillow Median Rent Much Higher than Others.

A recent Oregonian news story HERE reported that the current Zillow median Portland metro rent was $1,805. (I dug a little deeper and found that the Zillow median rent for the City of Portland was even higher at $1,861). 

Both of those rents are much higher than the Portland metro 2 BR HUD FMR of $1,236.  [Note that HUD FMR's also include a utility allowance, so the cost of rent alone is less the FMR]. 

The Portland Zillow median rent contrasts with another RealPage report the same week (HERE) that shows the median Portland metro rent as $1,242, 31% LESS than the Zillow estimate.

The December 2016 State of Housing In Portland report from the City of Portland (page 60) puts the average City of Portland rent at $1,347, 28% below the $1,861 reported Zillow median rent for the City of Portland.  The Portland report also provides useful breakouts by bedroom size, with the average rent for 2 BR units at $1,520, again substantially higher than the HUD 2 BR FMR of $1,242. 

The 2015 American Housing Survey for the Portland metro area says that the median cost spent for rent was $920. (Even if that was increased by 20% to adjust for differences in timing the result would still only be $1,104).

While I realize there is a difference between median and average rents and timing can also cause differences, the Zillow rent appears to me to be an outlier perhaps because it does not use only actual rent transactions/listings but instead adds a projection of what units might rent for IF they were available. 

To their credit Zillow does provide an explanation of their methodology (HERE) and access to a wealth of rent data (HERE) broken out by market segment (MF, SF, 1 BR, etc). AND 7 levels of geography. The median rent found in the Oregonian news story comes from their Zillow Rent Index series, which they explain uses models that "estimate rental prices on all homes, including those not presently for rent." [It isn't clear to me what mix of SF and MF rental units and bedroom sizes are used to arrive at the Zillow median rent estimate].

Rent surveys that only use listed rental prices have their own limitations as rent concessions reduce effective rents, especially in markets where there is excess supply.

Originally created and posted on the Oregon Housing Blog.

Thursday, January 5, 2017

Many Oregon Workers in High Demand Jobs Need to Work Long Hours/Two Jobs to Afford the Rent.

Building on my prior post HERE, I have constructed a new Excel worksheet HERE (and embedded below) that allows the user to select any combination of Oregon counties and 100 high demand occupations to see whether the 2016 statewide median wage for that occupation is sufficient to pay for the HUD 1 or 2 bedroom FMR at the county level.  

The last two rows of the worksheet show how many hours a full time median income worker would have to work to make the HUD 1 BR and 2 BR FMR affordable (with the wage earner paying 30% of their income for rent). 

The default setting shows in order from right to left the top 6 occupations with the highest # of annual openings and uses  Clackamas county (Portland metro) for rent comparisons.  [You can change the counties and occupations to meet your needs, but likely will have to download the file to do so]. 

The table shows that in the Portland metro area the median full time wage for 5 of the 6 highest demand jobs is NOT enough to make the HUD 1 AND 2 Bedroom Fair Market rent affordable. 

To make rent affordable for these 5 high demand occupations I calculate that the Portland metro median wage worker would have to work between 70 and 83 hours a week to make the 1 BR FMR affordable and between 83 and 98 hours a week for make the 2 BR FMR affordable. 

Originally created and posted on the Oregon Housing Blog

Tuesday, January 3, 2017

Jobs in Demand in Oregon Don't Pay Enough to Make Rent Affordable

The Oregonian recently did a story HERE  showing the top 100 occupations in Oregon based on projected annual job openings from 2014-2024 and included the 2016 median hourly wage for each of these occupations. 

I sorted the list and did a calculation of the weighted median wage for the 18 occupations that made up 50% of the projected annual job openings from these 100 occupations. 

As the table pasted below shows the weighted average median wage for those 18 occupations was $12 an hour, with the highest median wage of $41.55 (Registered Nurses) and the lowest $9.73 (Waiters and Waitresses ). 

I then went a step further and calculated the rent that would be affordable at the median wage for each of the occupations. 

For all 18 occupations the average median weighted hourly wage of $12 would make a $624 monthly rent affordable (at 30% of full time income). [Tip: To calculate an affordable monthly rent when you know the hourly full time wage, multiply the hourly wage by 52]. 

This $624 affordable rent at the weighted average median rent for these 18 occupations is lower than the HUD 2 BR FMR for EVERY county and metro areas in Oregon. (Oregon 2 BR HUD FMR's range from $681 to $1,242).  

Moreover, this $624 affordable rent at the weighted average median rent for these 18 occupations is ALSO lower the 1 BR FMR in every Oregon metro area, except Salem. (The Salem 1 BR HUD FMR is $612) 

Originally created and posted on the Oregon Housing Blog.