Tallahassee Home Affordability Is Better Than 30 Years Ago
Tallahassee home prices are soaring as demand remains strong while supply continues to dwindle.
As we continued to watch this seller's market strengthen, I wondered how affordable homes in Tallahassee are today versus when I began my real estate career back in 1991.
What I found surprised me. Homes are more affordable in 2020 than they were in 1991 and most of the years in between!
Well-Priced Homes For Sale In Tallahassee
Before we get to the analysis of today's home prices versus those of the past, take a quick look at some of the best-priced homes available in Tallahassee today.
Home Affordability Video
How To Measure Home Affordability
If you are a current subscriber to our newsletter, then you probably saw the recent publication on how home prices and mortgage payments have evolved since 1991. Home prices have risen, interest rates have fallen, and mortgage payments have gone higher (though not nearly as fast as have home prices).
As I was preparing the brief newsletter, it got me thinking about the true change in affordability for homes in Tallahassee. After all, people are earning more money today than they were in 1991, so what if I included a cost of living adjustment (COLA) to the data in order to see if homes were less, equal, or more affordable today than they were 30 years ago.
Fortunately, data for COLA data is available on the Social Security Website, and it allowed me to construct the graph below which shows a thirty-year view of home affordability in Tallahassee.
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Tallahassee Home Affordability Graph
The graph above contains the average annual home price (COLA Adjusted) as well as the average monthly mortgage payment each year (also COLA Adjusted). So what exactly is "Cola Adjusted?"
I took the data from the Social Security Administration website on the annual cost of living adjustment and converted it to a base value of "100" for 1991. Each year thereafter I adjusted for COLA changes by dividing the data by an appropriate COLA value and multiplying the result by 100. In other words, each year was adjusted to compare with 1991 based upon the cost of living adjustment.
As a side note, it would be nice to see a similar graph using inflation by adjusting using the Consumer Price Index, but this was a quick and easy method that gives us an interesting view.
So what is the big "ah-hah!" from today's graph?
When adjusted back to 1991 dollars, today's average mortgage payment is $514 per month compared to the $585 per month the average home buyer paid 30 years ago! When adjusted using COLA, today's homebuyer is spending about 12% less than what would have been spent in 1991.
So what do you think? Is the COLA adjustment a fair way to compare 2020 with 1991? Let me know what you think in the comments section below (or send me an email if you like).
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