Housing prices are outpacing wages... great!
After Matt Joy’s important, but long post yesterday… I figured today we’d keep it short and sweet for our readers!
There have been two attention grabbing statistics lately that seem to be shaping the future of the housing industry. The first was last week's release of the latest government employment report. The report noted that wages in February grew at a less-than-expected 0.1 percent, representing a 2.6 percent advance on an annualized basis. On the other hand, according to the latest S&P CoreLogic Case-Shiller's most broad survey, national home prices rose 6.2 percent annually. It appears that we’re seeing home prices outpace wages at more than double the rate. Mike Fratantoni of the MBA notes, “The major constraint in the market right now is the lack of supply. The absolute number of units on the market is near an all-time record low." Fratantoni then went on to say that home builders are trying to increase their pace of construction but "not fast enough."
So, house prices are growing faster than the average wage, housing supply is at an all-time low, and this is all setting the precedent right before the majority of the millennial generation enters the housing market (which according to some is a joke in and of itself). There is going to be a huge spike in the housing demand over the next 4-5 years but the offset between wage and price draws some skepticism in how this will all play out. All that said, the one bright spot is that employment in construction related jobs is at an all-time high. The most recent jobs report showed an increase of 61,000 new jobs created in the construction sector. Hopefully, we’ll see a pickup in housing inventory and more homes will hit the market.
Regardless, this is an exciting time to be in the mortgage industry and I’m interested on how this will play out.
Photo by Michael Browning on Unsplash
The opinions expressed in this post are the sole view of the writer and do not reflect the opinion of Princeton Mortgage Corporation.