Home prices have outpaced income growth
WASHINGTON (AP) — Home prices in 2018 climbed 4.5%, while incomes grew 3.2%, according to CoreLogic real estate figures and government wage data released Friday.
The gap suggests that affordability is worsening. Still, this gap appears to be narrowing relative in much of the country as gains in average hourly earnings have risen as the unemployment rate has fallen. Meanwhile, a slowdown in homebuying since 2018 has limited price gains in real estate and improved affordability.
Across the country, there are significant variations in this trend as some markets are seeing affordability worsen and others have seen it stabilize after rapid growth.
Home prices in the Boise, Idaho area jumped 16.3%, significantly higher than the 3.7% gain in incomes. The Florida retirement community known as The Villages saw a similar trend as incomes rose 3.1% while home values increased 7.7%.
Places such as New York, Seattle and San Francisco are already pricing out residents, forcing many to stay as renters or move to cheaper cities. But in the past year, rising incomes in these areas and slowing growth in home prices has improved affordability slightly. This doesn’t mean that middle-class workers can suddenly afford to buy in these communities, so much as the squeeze isn’t as great as it was at the start of 2018.
A few major metro areas have seen homes prices and incomes grow roughly in sync such that there have been minimal changes in affordability, including Atlanta, Louisville and Birmingham, Alabama.