Wide Gap Between Wages and Median Home Price: Home Buyers Dilemma

The BLS says wages are rising faster than the CPI. Prospective home buyers would not agree.

If you do not already own a home it's getting harder and harder to buy one. Meanwhile, rent outstrips wage growth.

Key Ideas

  • Those who seek to buy their first home will have a very difficult time finding one that is affordable.
  • There was a small window of buying opportunity from 2009 to 2011 but that window has since been closed.
  • Making matters worse, rent prices accelerated in 2011 and far outstrip wage growth.

Median vs Average Wages

It's important to note that hourly wages are averages. The median wage earner is even worse off. Also note the difference between median and average new home prices.

Purported CPI

The CPI is way understated for many, if not most people, as anyone in school, anyone paying their own medical insurance, or anyone seeking to buy a home will attest.

Median vs Average New Home Price

Meanwhile, the Fed is busy hiking. Each hike in interest rates lessens the amount of mortgage one can afford.

Mike "Mish" Shedlock

Comments
No. 1-11
Bam_Man
Bam_Man

We are living in “Financial Fantasyland”. The fantasy becomes ever more outrageous with each passing day. Continue to believe, at your own peril.

Banking
Banking

We're about 15-20% from the prior peak in 2006 on an after tax payment to median household income basis in San Diego. For reference, that's like 2004 timeframe when compared to 2006. We're already seeing weakness in high tax - high price - blue states, due to the tax law change. I think we see continued inventory growth in coastal blue states. It would now cost me 36% more per month to buy the same place I bought back in 2014, with about 10% of that being the higher mortgage rates.

Stuki
Stuki

It's called rent seeking: Having government ban others from obtaining cheaper housing, so that those connected and privileged get to charge rent waaayyyy in excess of what the equilibrium would be in a free market. It's no different from any other form of crass theft, aside from the tiniest sliver of obfuscation employed to sucker the permanently unintelligent into believing there is some sort of natural inevitability about it.

Tony_CA
Tony_CA

There is no longer a housing market. What is the point of evening discussing it at this conjunction?

JonSellers
JonSellers

The chart seems to show things going haywire in around 1985. De-regulation of finance? Or maybe the numbers were getting bigger the whole time and just became visible due to scaling of the graph...