Source: Fortune —
Simple economics dictates that neither home prices nor incomes can outgrow the other for very long. They go hand in hand. As incomes rise, those pour over into housing. In order for home price growth to stick around, there has to be a corresponding jump in wages.
That’s why housing economists are once again on high alert: The pandemic’s housing boom has seen home price growth far outpace income growth. Over the past 12 months, U.S. home prices are up 19.8% while private sector wages are up just 4.8%. The historically hot job market can’t keep up with the historically hot housing market.
That disconnect between home price growth and income growth has seen us reach affordability levels not seen since the last housing bubble. The typical American household would have to spend 32% of its monthly income to make a mortgage payment on the average-price U.S. home, according to Black Knight, a mortgage technology and data provider. That’s the highest level since 2006. For perspective, that figure averaged 19.9% during the 2010s.
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