Wednesday, May 28, 2014

The monthly costs of owning a house around SLC

Recently we looked at what percentage of SLC paychecks are going towards housing (by neighborhood). We saw that people in fancier areas are often over-extended on their houses. Relatedly, I've been fascinated about the trade-off people often make, moving further away from the city for cheaper housing and trading it for a longer commute. I want to see how this works in SLC (and if it's worth it). First, we've noticed that South Jordan is growing and building like crazy. In the post mentioned above, we noticed that those moving out to South Jordan and other neighborhoods further from SLC proper aren't typically spending a smaller percent of their paycheck on housing than those nearer the city center. But I wasn't sure if that was because people living in those areas have smaller paychecks to begin with, or if the housing out in the further-flung reaches of the valley is just as expensive as that in SLC itself. Overall, are people moving further from the city to save money on housing or to be able to buy a bigger house (both because there's more space and cheaper housing per square foot)?

Again, we turn to this data to attempt to answer the question. Here I'll plot average monthly housing cost in and around SLC:

Interestingly, people are typically spending more on housing costs in West Jordan, South Jordan, Herriman, and Draper than they are in Murray, Midvale, Millcreek, and SLC proper. Amazingly, monthly housing costs in the lower Avenues as well as East Millcreek and Canyon Rim are consistently cheaper than are housing costs in South Jordan. This is hard to believe, but appears backed up by SL Tribune data (on house prices by zip code) here. Overall, it appears people are flocking the fringes of the Salt Lake Valley because they desire an enormous house, not because they want to save money.

Note: I conclude that the higher housing costs in South Jordan, West Jordan, etc are mainly due to house size (compared to the rest of the valley) because it doesn't appear that prices are being driven up by a lack of supply in these suburban areas. If anywhere, SLC proper has the constrained supply of housing. I would love house size by neighborhood data if anyone has it.

Also note: if house down payments (as a percentage of house price) vary strongly across the valley, this would change the analysis somewhat, but until we have that data we'd have to guess people are using (typically very small) down payments of roughly similar percentages.

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