One argument I commonly hear is that Billings cannot be overpriced, because we're so cheap compared to the rest of the country.

Coldwell Banker's 2006 Home Price Comparison Index lended support to this argument when it listed Billings as the 8th most affordable housing market in the country. Here's their top 10:

1. Minot, N.D. $132,300
2. Killen, Texas $140,310
3. Arlington, Texas $140,975
4. Grayling, Mich. $144,250
5. Topeka, Kan. $148,050
6. Canton, Ohio $148,333
7. Tulsa, Okla. $148,575
8. Billings, Mont. $150,141
9. Fort Worth, Texas $151,250
10. Cadillac, Mich. $151,530

According to this, the Billings housing market should be comparable to the Tulsa market. I happen to be familiar with both, and simply put, there is no way that Billings is even close to Tulsa in the realm of affordability. If you could glance at real estate brochures from each city for two minutes, you would see that these markets are not equivalent.

Here are some hard facts on three of the markets, which, according to Coldwell Banker, should be similarly affordable. Data from the U.S. Census Bureau and Realtor.com.

Topeka, Kansas had a median household income of $35,928 in 2000. Current median asking price is $117,500. Of single-family houses, 42% are listed for less than $100,000.

Tulsa, Oklahoma had a median household income of $35,316 in 2000. Current median asking price is $112,000. Of single-family houses, 43% are listed for less than $100,000.

Billings, Montana had a median household income of $35,147 in 2000. Current median asking price is $203,500. Of single-family houses, 5% are listed for less than $100,000.

As you can see, these are drastically different markets. Tulsa and Topeka have median asking prices that are generally affordable by incomes there, while Billings prices are largely out of reach. Good luck finding any decent house in Billings for under $100,000; In Tulsa and Topeka, you can find a good starter home for well under $100,000.

$148,575 in Tulsa (the Coldwell banker "median home price") buys you a very nice, above-average house. $150,141 in Billings buys something that's barely a starter home.

So what is Coldwell Banker's methodology? According to their website:

HPCI subject homes are based upon a single-family dwelling model with approximately 2,200 sq.ft., 4 bedrooms, 2 1/2 baths, family room (or equivalent) and 2-car garage. Surveyed homes and neighborhoods are typical for corporate middle-management transferees.

The 2200 square foot, 4 bedroom house is easy to find at the $148k Tulsa price. But can you find one in Billings for $150k? The answer is yes.. sort of. If you count all the homes listed within 5% of the $150,141 asking price in Billings, they have a median square footage of 1,872. So the typical house in that range is smaller, but there are several with 2,200 square feet or over available. They may not exactly be what "corporate middle-management" is looking for, though.

There is a fundamental difference between Billings and Tulsa real estate that would skew an index based only on square footage. In Billings, a large percentage of the houses have basements. But in Tulsa basements are extremely rare. So in Billings, a 2,200 square foot house is likely to just be a modest rancher with a basement. In Tulsa, it's more likely to be a large one-story house or a decent two-story house. In general, the Tulsa house would be much nicer for the same price.

Let's have a look at some houses from Realtor.com.

First, in Billings for $150,000. This one is on Grand Avenue (a major arterial street). It's 2160 square feet with 4 bedrooms and 1 bathroom.




This one is in suburban Tulsa for $145,000. It has 2049 square feet, 4 bedrooms, and 3 bathrooms.




And finally, one in Topeka for $145,000. This is a very nice 2-story house with a whopping 2780 square feet, 4 bedrooms, and 3 bathrooms.



There you have it. Coldwell Banker's index is flawed. Although it is possible to get 2000+ square foot houses in each of these cities for around $150,000, quality varies wildly. Billings is simply not as affordable a market as Topeka and Tulsa.