A new report from RealtyTrac gets to the core of why the U.S. housing market is so sluggish.
According to the firm's research, home price appreciation outpaced wage growth in 76% of U.S. housing markets from 2012 to 2014.
What's more, home price appreciation outpaced wage growth by a 13:1 ratio during that same two-year time period.
The report analyzes data from the U.S. Bureau of Labor Statistics as well as home sales data in 184 markets to arrive at its findings.
‘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, in a statement. ‘Eventually, however, those traditional buyers will need to play a bigger role in the housing market for the recovery to maintain its momentum.
‘Those markets with the biggest disconnect between price growth and wage growth during the last two years are most likely to see plateauing home prices in 2015 until wages catch up,’ he adds. ‘Meanwhile, markets where wage growth has outpaced home price appreciation during the last two years are poised to see at least steady growth in home prices in 2015 in most cases.’
The report finds that during the economic recovery, wages increased 1.3% while home prices increased 17%.
Despite the major disparity, most markets are still affordable by traditional standards, RealtyTrac says. Of the total 184 markets analyzed, 135 (73%) with a combined population of 143 million had a median home sales price in December that required less than 28% of median income for monthly mortgage payments, including property taxes and insurance.
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