As cities and chambers of commerce look for ways to attract businesses to their city or county, they look for items that might be considered a competitive advantage. A combination of subjective and objective measures are used to highlight the benefits of the city/county. One of the objective measures of interest to businesses and individuals considering relocating to a city/county is how affordable it is to live in the city or county. The National Association of Home Builders (NAHB) publishes an “opportunity” index each quarter, for the 223 major metropolitan statistical areas (MSA) in the United States. The index is designed to show what percent of the population can afford to buy a house in the MSA where they live.
When we look at the Spokane MSA, compared to the other MSA’s in the Northwest (Washington, Oregon and Idaho) Spokane ranks #2. Pocatello, Idaho is the most affordable MSA in the Northwest. If we expand it to the Western Region (Alaska, Arizona, California, Colorado, Idaho, Montana, Nevada, New Mexico, Oregon, Utah and Washington), Spokane ranks #8 out of 66 cities. On a national basis, Spokane ranks #75 out of 223.
Here is the Housing Opportunity Index for the major cities in the Northwest
|MSA||Housing Opportunity Index|
|Puget Sound (Seattle-Bellevue-Everett)||48.1%|
Here are the full details including median income, median home price, opportunity index, national rank and regional rank:
|Median Income||Median Home Price||Opportunity Index||National Rank (Out of 223)||Regional Rank (out of 66)|
For those who like to know the details, here is the NAHB’s description of the Housing Opportunity Index (HOI) published on their web site:
For income, NAHB uses the annual median family income estimates for metropolitan areas published by the Department of Housing and Urban Development. NAHB assumes that a family can afford to spend 28 percent of its gross income on housing; this is a conventional assumption in the lending industry. That share of median income is then divided by twelve to arrive at a monthly figure.
On the cost side, NAHB receives every month a CD of sales transaction records from CoreLogic. The data include information on state, county, date of sale, and sales price of homes sold. The monthly principal and interest that an owner would pay is based on the assumption of a 30 year fixed rate mortgage, with a loan for 90 percent of the sales price (i.e., 10 percent down payment). The interest rate is a weighted average of fixed and adjustable rates during that quarter, as reported by the Federal Housing Finance Agency. In addition to principal and interest, cost also includes estimated property taxes and property insurance for that home. This is based on metropolitan estimates of tax and insurance rates from the most recent American Community Survey. Mortgage insurance is not currently a component of the HOI.
Therefore, for each record, there is an estimated monthly cost and available income share. The HOI is the share of records in a metropolitan area for which the monthly income available for housing is at or above the monthly cost for that unit.
Naturally, there are many objective and subjective measures that a city/county may use to market themselves to prospective companies but, when it comes to opportunity/affordability, the Spokane MSA scores near the top.
Steve Scranton is the Chief Investment Officer and Economist for Washington Trust Bank and is a CFA charter holder with over 30 years of investment experience with equities, tax-exempt and taxable fixed income securities. Steve actively participates on committees within the bank to help design strategies and policies related to client and bank owned investments. Steve also serves as the economist for the Bank and has been a featured speaker for both client and professional organization events throughout the Northwest.