Growth of Home Prices and Household Incomes

S&P Corelogic Case-Shiller reported today that home prices rose again in July, and at an even faster rate than June. The price increase monthly record from July 2006 was almost broken, falling short by only 0.6%.

Something else to consider is the increase in incomes. As home prices continue to rise, so do incomes; which happened to rise faster than the home prices. Perhaps if things continue this way and avoid any market disasters, the home affordability problem could be solved.

We are seeing home prices continue growing steadily, and the rise in incomes is one of the several factors influencing it. The U.S. Census Bureau reported that for the first time in eight years, household incomes have seen substantial increases in household income by 5.2%.

Considering the income growth is keeping up with the growth of homes, sometimes exceeding it is a strong sign for the future. On the other side, the incomes are so far behind; it’s still going to take a while for homes to become affordable.

Some economists believe wage inflation needs to be hiked up a bit for the market to completely mend.

Brent Nyitray of iServe Residential Lending said earlier today, “The real estate indices are beginning to show a slowdown in home prices appreciation. Until we start seeing wage inflation, real estate prices will be stretched versus incomes.

The Vice President of Quicken Loans Bill Banfield, is of the same opinion.

“Despite recent data pointing to slower sales, home prices continue to rise faster than incomes in many areas. Low inventory will continue to be a challenge for buyers looking for the right home and can cause those bidding to be more aggressive on the house they finally want to purchase.”

Some west coast cities like Seattle, Denver, and Portland saw the highest gains over the past six months. Their numbers were Seattle 11.2% Denver 9.4% and Portland with the highest at 12.4%

Again, if this path can continue without falling into any major economic, or market disasters, affordability will become the new norm for all Americans. 

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