Home Prices Outpacing Wages — By A Lot

Nationwide, homes have appreciated 13 times faster on average than wages have grown over the past two years.

Home prices increased at a faster rate than wages did over the past two years, a new analysis shows.

At least, that was the case in 76 percent of the U.S. housing markets that RealtyTrac analyzed.

The company compared 2014 numbers to 2012 numbers, using weekly wage data from the U.S. Bureau of Labor Statistics and home price data from sales deeds to evaluate 184 metropolitan statistical areas in the country.

During that time period, RealtyTrac found, home prices (which grew 17 percent nationwide) outpaced wages (which grew 1.3 percent) by a 13:1 ratio nationwide, meaning prices grew 13 times faster than wages did.

The housing markets where home prices outpaced wages by the largest ratios are:

  • Merced, California (by a 141:1 ratio)
  • Memphis, Tennessee (99:1)
  • Santa Cruz, California (94:1)
  • Augusta, Georgia (78:1)
  • Palm Bay-Melbourne-Titusville, Florida (62:1)

RealtyTrac vice president Daren Blomquist explains:

Those markets with the biggest disconnect between price growth and wage growth during the last two years are most likely to see plateauing home prices in 2015 until wages catch up. Meanwhile, markets where wage growth has outpaced home price appreciation during the last two years are poised to see at least steady growth in home prices in 2015 in most cases.

Markets where wage growth managed to outpace home appreciation include:

  • Hagerstown-Martinsburg, Maryland-West Virginia
  • Wichita, Kansas
  • Des Moines, Iowa
  • Gulfport-Biloxi, Mississippi
  • Harrisburg, Pennsylvania
  • New York-Northern New Jersey-Long Island
  • New Haven, Connecticut
  • Virginia Beach, Virginia
  • Tulsa, Oklahoma
  • Raleigh, North Carolina

Meanwhile, some U.S. investors interested in commercial real estate are turning away from American properties and looking to European real estate instead, Bloomberg Business reports. More are expected to do the same this year in light of the strengthening dollar:

U.S. spending on European commercial real estate last year was just short of the 2007 peak, according to Real Capital Analytics Inc. The record may be broken this year after a strong first quarter, said Simon Mallinson, RCA’s managing director for Europe, the Middle East and Africa.

“With the U.S. markets becoming increasingly expensive and with the currency advantage we are starting to see, the U.S. institutions are making a big push for Europe,” said Richard Divall, head of cross-border capital markets at broker Colliers International. “Europe is the region of the world that still has distress.”

Are home prices realistic in light of wages where you live? Share you thoughts in the comments section below or on our Facebook page.

Stacy Johnson

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