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.
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Homes have a long way down to go before they are affordable. Homeowners hope this will never happen, however, never say never. The good news is the economy is doing ok even as home prices give up some gains. We really need rental prices to drop to help solidify the economy and get money into spending on other things besides housing, health insurance, and education.
But this is just forcing multigenerational living on steroids. It is funny to see Joe Weisenthal, I think it was Joe, anyway, and the guest talk about pent up demand for housing on Bloomberg. Moon, I would call it caged demand, because it isn't going to escape anytime soon.
Indeed. Sadly we are gradually moving to the type of housing you see in Asia and Mexico where 3 generations live in the same house. Well, hopefully it will strengthen the family structure at least.