Home Prices Surge Above Wage Growth

Happy Easter Everyone!

The market is hot here in the silicon valley because of robust job growth and an influx of foreign investors making all cash offers. I've worked with some of these investor buyers myself, but I have also worked with traditional buyers - the working couple, each working full time, trying to raise kids who don't have enough cash to purchase the home outright and have to rely on financing. These traditional buyers are having a hard time competing with the investor buyer with too much cash to play around with, but with the right agent (hint, hint), who has the market savvy, negotiating skills and connections, these traditional buyers can be successful in snagging a home of their dreams away from the sharks. It can be done!


Home Prices Surge Above Wage Growth

Home price appreciation outpaced wage growth in 76 percent of the U.S. markets during the housing recovery, according to a new report released by RealtyTrac, which analyzed growth in average weekly wages compared to median home prices in 184 metro areas nationwide.

Between the second quarter of 2012 and second quarter of 2014, home prices have gone up 17 percent, while wages have only risen 1.3 percent, RealtyTrac’s study finds.

"Home prices in many housing markets across the country found a floor in 2012 and since then have rapidly appreciated, particularly in markets attracting institutional investors, international buyers or some other flavor of cash buyer not constrained by income as much as traditional buyers," says Daren Blomquist, vice president at RealtyTrac. "Eventually, however, those traditional buyers will need to play a bigger role in the housing market for the recovery to maintain its momentum."

The markets with the largest "disconnect" between price growth and wages during the last two years will mostly likely reach a plateau with home prices in 2015 as wages catch up, Blomquist notes.

Regardless of the rapid increase in home prices over the last two years, the majority of the housing markets tracked remain affordable, RealtyTrac notes. Of the 184 markets analyzed, 73 percent had a median home sales price that required less than 28 percent of a household’s median income to cover the monthly mortgage payments (28 percent is largely used as a threshold for measuring affordability).

Where Home Prices Outpaced Wage Growth by the Most

RealtyTrac found that the following metro areas had the highest ratio of price appreciation to wage growth:

• Merced, Calif.: 141:1
• Memphis, Tenn.: 99:1
• Santa Cruz, Calif.: 94:1
• Augusta, Ga.: 78:1
• Palm Bay-Melbourne-Titusville, Fla.: 62:1

Source: RealtorMag Online
http://realtormag.realtor.org/daily-news/2015/03/27/home-prices-surge-above-wage-growth?om_rid=AAFmZk&om_mid=_BVFZAWB9AQtFKm&om_ntype=RMODaily