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Housing Affordability in Clinton County
by Colin Read, August 12, 2009
Housing is the single most significant outlay for most middle income families. It is also a spending category that defies easy analysis. Family needs differ, housing quality, size, and location vary widely, commuting distances depend on both the housing choice and the employment decision, and such economic factors as income, debt, and mortgage rates affect choices. Despite these complications, housing remains one of the most important determinants of quality of life and is an important element for economic development.
Housing affordability hinges on the interplay between the distribution of home prices in a region and on the distribution of family incomes. The following graph illustrates data from the Commerce Department’Äôs routine Current Population Survey on New York household incomes, and tax reporting data for Clinton County from the State of New York Office of Taxation and Finance.
We see that, when compared to the State of New York as a whole, a greater share of Clinton County households live on incomes below $30,000 per year. While the median household income in New York State is approximately $48,000, this data source reports a median household in Clinton County of around $41,000 per year.
Housing affordability also depends on the distribution of housing prices. While reported median home prices typically range between $110,000 and $120,000 in Clinton County, there are opportunities of families below median incomes and median home prices. To see these opportunities, I have graphed the distribution of asking prices for all homes in Clinton County as of June 5, 2009.
The asking price is not necessarily the transacted price of homes. Some less motivated sellers may set an asking price significantly higher than the market clearing price. Also, negotiations usually result in a transacted price that is thousands of dollars lower than the asking price. Finally, the MLS contains homes for sale, not all homes. For instance, Zillow.com, a home price index service quotes the median home price in Plattsburgh at $110,900, which is lower than the median MLS price. Nonetheless, the MLS price distribution is a good indication of the spread of prices in the housing inventory.
The interplay between housing prices, household incomes, and housing affordability also depends on the level of debt of potential homeowners, their ability to put up a reasonable down payment typically in the range of 20% of the housing cost, and Federal Housing Administration (FHA) guidelines on the level of monthly housing payments to income.
The FHA guideline is that the mortgage, property taxes, and insurance should represent no more than 28% of a household’Äôs gross income. The next graph shows the level of income needed to support various homes (by housing price percentile). It assumes a typical mil rate for school and property taxes of $34 per thousand of home value and an insurance cost of approximately $3 per thousand of home value. It also assumes a rate for a 30 year mortgage of 5.50%.
The graph allows us to make some interesting observations. A median household with an income of $41,000 per year will only modest pre-existing debt and sufficient resources to pay a 20% down payment is able to afford about 30% of the available homes, using conventional mortgage financing. A household income in the mid 50’Äôs can afford the median home, and an income of about $90,000 would support 80% of homes listed in Clinton County. A household with an income as low as $20,000/year is able to afford 5% of asking prices for single family detached homes. There were about 25 such homes listed at the time of this analysis.
Overall, Clinton County housing is quite affordable, especially in comparison to national averages. Property in Clinton County is often situated on lots that are larger than urban areas. The caveat is that property taxes per thousand dollars in property value are higher than in some areas. However, the total tax burden is reduced because of the comparatively low cost of the housing stock. For instance, home prices just across Lake Champlain in Vermont are often upwards of 50% higher for similar housing quality. Clinton County remains an excellent and affordable opportunity for those seeking housing and earning the wages offered for jobs recently created in this region.