Across the United States home prices are on the rise. However, one city is an outlier when it comes to how large the divide is between median home price and wages.
Per an article published on Zerohedge, the latest data from the bureau of labor and statistics tells a story of home prices rising. In and of itself this is not surprising. However, median home prices are outpacing wage increases by a wide margin.
Hourly wages rose at a healthy 2.9% over last year. This is a decent gain, though it is below the target 3.5%-4.5% increase. However, home prices are rising more rapidly. Every metro area in the United States saw rising home prices, and 15 out of 20 major cities saw increases of 5% or greater.
Winners and Losers
While all metro areas saw rising home prices, here are the winners and losers.
Lowest Percent Increase:
4. New York
1. Washington D.C
Highest Percent Increase
3. San Diego
2. Las Vegas
1. Seattle (by a lot)
While each of the metro areas with the largest increase saw a percentage change of between 6%-10%: Seattle was #1 by a mile with whopping 13.2% increase over last year.
The massive increase is seemingly without cause which is even more reason to be suspicious of the real estate market in Seattle. The 13.2% increase in home prices may suggest that a real estate bubble is forming.
Rising Home Prices: What Does It Mean?
According to NAR (National Association of Realtors) chief economist Larry Yun, the divide is troubling. The greater the disparity between home prices and wages; the less affordable homes become to the average buyer.
What’s more, the percentage increase in household income necessary to buy a median-priced home in these markets is increasing. On average, an end-user, shelter-buyer with a 10% down payment would need a 6% increase in income in order to afford a home in most of the United States. By comparison, the average home buyer in Seattle would need a 23% increase in earnings to afford a median-priced home in the city.
Notable exceptions are Pittsburgh and Atlanta where prices remain relatively affordable.
The housing market is usually stable, however memories of 2008 are still fresh in many people’s minds. There are also peaks and valleys when it comes to real estate and with pending changes to both tax and interest rates on the horizon, things can change rapidly.
Most of the largest US cities are seeing rising home prices at a rate that outpaces the relative earnings of potential buyers. Of course, these are median prices and wages so your mileage may vary based on your own income, savings, and more. This is why City vs City’s powerful cost of living calculator can help you make an informed choice based on your situation. Not statistical averages.
For example, while the New York metro area saw a relatively small increase in home prices over last year, the average cost of homes in the area are still higher than many other cities in the country. What you may consider an inexpensive home in New York may be a palace in Cincinnati.
With City vs City’s patent pending technology, you can compare different cities to see how they stack up. Compare your current city with another one in the United States. Calculate your earning, spending habits, and other factors to see if the city you’re thinking of moving to is a better fit.
While the housing market will ebb and flow; City vs City will be front and center with the tools and data you need to find your next home city.