With a recent study ranking Oklahoma the fourth cheapest housing market in the United States, experts say the state is a good location to take advantage of the current low interest rates and purchase a home.
The Ascent, a personal finance brand by financial and investment advice company The Motley Fool, examined Zillow housing pricing data and found that with an average price of just over $134,000, Oklahoma’s median home price in 2020 is fourth behind Arkansas, Mississippi and West Virginia.
Matt Frankel, CFP and mortgage analyst for The Motley Fool, said the reason Oklahoma housing is cheap is due to a combination of factors, including a large amount of developable, flat land.
“The real estate market is supply and demand, so that takes care of the supply. The demand is definitely picking up, but it’s low relative to a lot of other places in the country, and a big factor in that is salaries,” Frankel said.
According to PayScale, the average salary in the greater Oklahoma City area is $59,000, nearly $36,000 lower than the national average.
“So that’s another thing that really affects demand, is the ability for homebuilders and sellers to charge higher prices,” Frankel said. “It’s a function of salaries attracting people to the area.”
As recent trends reveal the eventual likelihood of higher home prices in Oklahoma compared to the other top 10 cheapest markets, Frankel said it’s likely the state drops down the list.
“Oklahoma is one of the hottest housing markets in the U.S. looking at all of the states. Home values are up over 5% year over year,” Frankel said. “ … It’s the fastest growing in terms of price of the top 10 cheapest housing markets in the country.”
While Oklahoma is one of the cheapest housing markets in the country, homeowners are paying an average of nearly $1,900 annually for insurance, which is the fourth highest rate, according to the Insurance Information Institute.
Despite the rising home values and the fact that homeowners insurance is higher than average, Frankel said home ownership in Oklahoma is highly affordable relative to most markets.
Home prices jumped nationwide 5.9% in August annually, according to CoreLogic, and Rob Schaerer, broker and associate of Dillard Group Real Estate and 360 Realty, which serves the Oklahoma City metro area, said in Oklahoma, prices are rising at an unprecedented rate.
Multiple Listing Service statistics show the median home sale price for the metro area was $180,000 in Sept. 2019. In Sept 2020, the median sale price was 11.7% higher at just over $201,000.
Schaerer cites dwindling inventory as a reason for the rising prices of real estate.
In Norman, there were 432 houses available for sale in Sept. 2019, and 292 for sale in Sept. 2020, which is a 32% decrease in inventory, according to MLS data.
“Buyers are fervently trying to buy houses but the appraisers are desperately trying to keep up with this,” Schaerer said. “Everything is pointing in the direction of a quickening of the appreciation and even more fervency next year if the trends continue, and I don’t see any reason to believe that they won't, it’s a pretty clear trend line.”
Schaerer said every sign points towards values, both intrinsic and actual, increasing for single family homes in Norman, but despite the increase in home values, the combination of the cheap housing market in the state and historically low interest rates makes it an advantageous time to buy a house in Oklahoma.
“I just had someone lock in at 2.875% a few days ago, so when you are talking about people's ability to purchase in conjunction with the increase in value, those are going to go hand in hand,” Schaerer said.
Schaerer sees houses as assets that can stabilize families, allowing them to invest in what could essentially be a retirement plan, which will free up a significant amount of income eventually in addition to gaining value over time.
“There's no better time to start chipping away at and paying off a house even if it is at higher evaluations,” Schaerer said.
Frankel advises those looking at making a real estate purchase to make sure they are shopping around for a mortgage, even when rates are low across the board.
“Just a .1% difference in a mortgage rate can mean thousands of dollars in interest savings over the term of a 30 year mortgage,” Frankel said. “You would be surprised what the same borrower would get offered from three or four different lenders how different the rates can be.”
Frankel said one’s credit isn’t adversely affected if one applies for multiple mortgages within a short period of time.
“You can apply for 50 different mortgages, as long as they all occur within 2 weeks it only gets counted once,” Frankel said. “There's really no reason not to, other than the fact that it might take a few hours, but the savings can be well worth it, even if you just save a little bit on the mortgage rate.”
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