Where Higher Wages Spur More Home Sales

December 1, 2014

The five metro areas that have posted some of the strongest year-over-year sales growth also have seen median incomes rise from last year, according to a new home sales report by the real estate brokerage Redfin. Orlando is the one exception on the list, where the uptick in sales has mostly been attributed to strong home-buying activity from investors.

While wage growth isn’t the single factor explaining the rise in these markets, a correlation does seem to exist, Redfin economists note.

Redfin notes the following metros saw some of the largest sales increases this year, as well the percent change in median income during that time:

1. Tampa, Fla.

Home sales year-over-year: 19.7%

Percent change in median income: 1.1%

2. Orlando, Fla.

Home sales year-over-year: 18.9%

Percent change in median income: -6.3%

3. Portland, Ore.

Home sales year-over-year: 13.7%

Percent change in median income: 1.6%

4. Raleigh-Durham, N.C.

Home sales year-over-year: 13.3%

Percent change in median income: 0.7%

5. Boulder, Colo.

Home sales year-over-year: 12.9%

Percent change in median income: 5.7%

On the other hand, Redfin researchers found that the five places that posted the largest year-over-year declines in sales growth also saw median incomes drop—or posted mostly stagnant wage growth—compared to last year. Those cities were:

1. San Jose, Calif.

Home sales year-over-year: -67.6%

Percent change in median income: 0.6%

2. San Francisco

Home sales year-over-year: -29%

Percent change in median income: -1.4%

3. San Diego

Home sales year-over-year: -12.2%

Percent change in median income: 0.6%

4. Las Vegas

Home sales year-over-year: -8%

Percent change in median income: -8.1%

5. Long Island, N.Y.

Home sales year-over-year: -5.2%

Percent change in median income: -1.8%

“An increase in home sales is a positive sign, but for a housing market to be healthy and sustainable over the long term, incomes must increase as home prices rise,” according to Redfin’s latest housing report. “But wages nationally have barely kept up with inflation, let alone house prices, especially in high-cost areas like San Francisco and Long Island where prices have risen by 15 percent and 6.4 percent respectively since last year, while median incomes dropped by 1.4 percent and 1.8 percent.”

Source: “Home Sales Up 2.2% in October, So Why Now?” Redfin Research Center (Nov. 25, 2014)