Home Price Gains as Worker Wages Stall

Home prices are going up even more in America, but wages are not rising for most middle class Americans.  A new study by CoreLogic shows a 6.7% year-over-year increase in home prices in March. Home prices have gone up in every month over the last four years, according to CoreLogic.

Home prices are going up even more in America, but wages are not rising for most middle class Americans.  A new study by CoreLogic shows a 6.7% year-over-year increase in home prices in March. Home prices have gone up in every month over the last four years, according to CoreLogic.

While home prices are still below their 2008 peak, so too are incomes, and real median household incomes have fallen over 6% from 2007 to 2014, according to the Federal Reserve. With the average household losing over $308 per month in income over the last nine years, the higher home prices have become significantly less affordable for most Americans.

Further home price growth is expected, and CoreLogic Chief Economist Frank Nothaft believes that will help fuel economic growth more broadly. “Housing helped keep U.S. economic growth afloat in the first quarter of 2016 as residential investment recorded its strongest gain since the end of 2012,” said Nothaft, adding that accommodative monetary policy from the Fed is also helping the economy. “Low interest rates and increased home building suggest that housing will continue to be a growth driver.”

While that could increase wages across the board, that is not necessary, and several economists disagree about how significant home price growth can be for the economy as a whole after the fundamental restructuring of the 2007-2009 global financial crisis.

“Home prices reached the bottom five years ago, and since then have appreciated almost 40 percent,” said CoreLogic President and CEO Anand Nallathambi.

Regional Variations

Home price changes vary significantly from state to state, with Maryland seeing less than 1% in year-over-year price increases, while Washington and Oregon are seeing over 10% in year-over-year price increases.

Those states, combined with California (up 6.2%), Nevada (up 6.9%), and Arizona (up 5.8%) were broadly driving the price growth throughout America. “The highest appreciation was in the West, where prices continue to increase at double-digit rates,” noted Nallathambi.

Future Growth Expected

The price growth in March noted a significant acceleration in price growth, causing CoreLogic to predict home prices would rise by 5.2% on a year-over-year basis in February 2017.

Despite weak wages, which CoreLogic does not track, the research group’s CEO remains confident the price gains will bolster the economy and are boosting middle class America. In April, he noted, “Home prices continue to rise across the U.S. with every state posting year-over-year gains during the last 12 months. Improved economic conditions and tight inventories continue to drive exceptionally strong gains in many markets, especially for homes priced below $500,000.”