Home Prices Surge Above Wage Growth
March 27, 2015
Home price appreciation outpaced wage growth in 76 percent of the U.S. markets during the housing recovery, according to a new report released by RealtyTrac, which analyzed growth in average weekly wages compared to median home prices in 184 metro areas nationwide.
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Between the second quarter of 2012 and second quarter of 2014, home prices have gone up 17 percent, while wages have only risen 1.3 percent, RealtyTrac’s study finds.
"Home prices in many housing markets across the country found a floor in 2012 and since then have rapidly appreciated, particularly in markets attracting institutional investors, international buyers or some other flavor of cash buyer not constrained by income as much as traditional buyers," says Daren Blomquist, vice president at RealtyTrac. "Eventually, however, those traditional buyers will need to play a bigger role in the housing market for the recovery to maintain its momentum."
The markets with the largest "disconnect" between price growth and wages during the last two years will mostly likely reach a plateau with home prices in 2015 as wages catch up, Blomquist notes.
Regardless of the rapid increase in home prices over the last two years, the majority of the housing markets tracked remain affordable, RealtyTrac notes. Of the 184 markets analyzed, 73 percent had a median home sales price that required less than 28 percent of a household’s median income to cover the monthly mortgage payments (28 percent is largely used as a threshold for measuring affordability).
Where Home Prices Outpaced Wage Growth by the Most
RealtyTrac found that the following metro areas had the highest ratio of price appreciation to wage growth:
- Merced, Calif.: 141:1
- Memphis, Tenn.: 99:1
- Santa Cruz, Calif.: 94:1
- Augusta, Ga.: 78:1
- Palm Bay-Melbourne-Titusville, Fla.: 62:1
By REALTOR® Magazine Daily News
Updated: July 22, 2019