This page has been archived and commenting is disabled.
The US Housing Bubble In One Chart: Home Prices Outpace Wage Growth 13:1
If there is one chart that most clearly captures the unsustainable US home price appreciation bubble, it is the following which was released overnight from RealtyTrac: it is based on an analysis of wage growth and home price appreciation during the U.S. housing recovery of the past two years and has found home price appreciation has outpaced wage growth in 76 percent of U.S. housing markets during that time period. The conclusion: home price appreciation nationwide has outpaced wage growth by a 13:1 ratio!
Some of the other RealtyTrac report's 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,” said Daren Blomquist, vice president at RealtyTrac. “Eventually, however, those traditional buyers will need to play a bigger role in the housing market for the recovery to maintain its momentum.
What goes up, unsustainably, must come down, or at least hold it growth until wage growth finally picks up.
“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,” Blomquist continued. “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 math is well known to frequent readers. Nationwide, median wages have increased 1.3 percent between the second quarter of 2012 –when home prices bottomed out and started rising again — and the second quarter of 2014. Meanwhile home prices have increased 17 percent in the two years ending in December 2014, outpacing wage growth by a 13:1 ratio.
Among the 184 metro areas analyzed, the average wage growth over the two years ending Q2 2014 was 3.7 percent while the average home price appreciation in the two years ending in December 2014 was 13.4 percent.
Where it the appreciation imbalance the biggest? Home price appreciation outpaced wage growth in 140 of the 184 metro areas (76 percent) with a combined population of 176 million. Metropolitan statistical areas with the highest ratio of price appreciation to wage growth included Merced, California (141:1), Memphis, Tennessee (99:1), Santa Cruz, California (94:1), Augusta, Georgia (78:1), and Palm Bay-Melbourne-Titusville, Florida (62:1).
Other metro areas where home price appreciation has outpaced wage growth by a wide margin during the housing recovery included Sacramento, California (17:1 ratio), Riverside-San Bernardino, California (15:1 ratio), Las Vegas, Nevada (14:1 ratio), and Detroit (12:1 ratio).
“As wage growth remains fairly flat across the Ohio markets, the effects of low available inventory continue to escalate prices, creating a negative effect on home affordability for many first time, and move up home buyers,” said Michael Mahon, executive vice president at HER Realtors, covering the Ohio markets of Cincinnati, Dayton and Columbus, the latter of which has seen home price appreciation outpace wage growth by a ratio of 9:1 during the housing recovery. “While the time to purchase is now, for home buyers to take advantage of all time low interest rates, continued stress on home affordability and credit repair shall leave many missing this prime time opportunity of home ownership.”
Among the 140 markets where home price appreciation has outpaced wage growth during the housing recovery, 45 metro areas (32 percent) with a combined population of 63 million had a median home price in December that required more than 28 percent of the median income for monthly mortgage payments — unaffordable by traditional standards.
These 45 traditionally unaffordable markets with price appreciation outpacing wage growth included Los Angeles, San Francisco, San Jose and San Diego in California, Seattle, Portland, Boston and Denver.
“The good news in Seattle is that we have higher than average income growth. The bad news in Seattle is that homes are becoming increasingly less affordable, especially in the core areas near the city,” said OB Jacobi, president of Windermere Real Estate, covering the Seattle market. “While wages in Seattle are expected to continue rising at a healthy pace, so too are housing prices. And as long as buyer demand outpaces seller supply, it is unlikely that we will see any improvement in affordability in the foreseeable future.”
“Marketing homes in areas that have home ownership costs continually outpacing wage growth means that you run into more people leaving areas for their next move, up or down,” said Mark Hughes, chief operating officer at First Team Real Estate, covering the Southern California market. “The dynamics driving the affordability, or lack of affordability, have as much to do with the new global nature of real estate as much as they have to do with the speed of local wage acceleration. Southern California will remain increasingly unaffordable from within, but a hot commodity world-wide.”
It's not all doom and gloom for homeowners: Wage growth outpaced home price appreciation in 44 of the 184 metro areas (24 percent) analyzed with a combined population of 51 million. Metropolitan statistical areas with the lowest ratio of home price appreciation to wage growth were Hagerstown-Martinsburg, Maryland-West Virginia, Wichita, Kansas, Des Moines, Iowa, Gulfport-Biloxi, Mississippi, and Harrisburg, Pennsylvania.
Other metro areas where wage growth outpaced home price appreciation during the housing recovery included New York-Northern New Jersey-Long Island, New Haven, Connecticut, Virginia Beach, Tulsa, Oklahoma, and Raleigh, North Carolina.
Of course, the biggest determinant of home price appreciation over the past 2 years has nothing to do with US consumers, or household formation, as confirmed by the collapse in first-time homebuyers or the unprecedented depression in new mortgage origination, and everything to do with what we first suggested is one of the main drivers of the US housing bubble - foreigners parking their illegally procured cash in the US and evading taxes, now that US housing, with the NAR's anti-money laundering exemption blessing, is the new normal's Swiss Bank Account. That and flipping homes from one "all-cash" buyer to another "all-cash" buyer in hopes of a quick capital appreciation and the constant presence of the proverbial dumb money.
Until it is made overhwlemingly costly for illegal offshore wealth to be parked in NYC triplexes, or home flipping is regulated out of existence, expect the housing bubble to continue rising to even more eyewatering highs.
»
- 35065 reads
- Printer-friendly version
- Send to friend
- advertisements -
Totally sustainable...
http://olduvai.ca
Pull up a 40 year chart of the ten year Treasury and the 'housing boom outpacing wage growth' begins to make sense.
Click the link and after loading the chart select "max" for the time frame.
in the end, its the free shit army versus hard working americans. you can only give out so many entitlements. eventually we all pay for it.
and who would have thought that "bailouts" werent free?
Ultimately the 'price' of any large ticket item is directly correlated to the
'cost' of money.....and the 'cost' of money has been dropping for 30
plus years. Eventually the cost of money will be so low (cheaper than free) there will be no 'value' left in money.
That's another way of describing inflation.
Simple...the Fed printed and spent $trillions on mortgages (houses) but none on wages.
Cog, thats a great way of describing inflation actually. or atleast the "faith" in the underlying currency. hand in hand i suppose
Agreed - in the limit as mortgage rates head for zero (they are sub-2% in Germany) the price tends toward infinity (e.g. 1.5 million euros for a 100 square meter *apartment* (1076 square feet) in Hamburg).
All that matters to the Sheeple is whether they can make the monthly payments.
All that matters to the Guvmint is that they can raise the property taxes by 3% per year (note that this is an exponential increase!).
If something cannot go on forever, it will stop. - Herbert Stein
This is the [false] narrative TPTB want you to believe. Instead of blaming them, blame other citizens. It works great for weak, feable minds. Entitlements are not the problem. Coddling the rich costs society much much more (see the FED's 5 trillion over 5 years), and actually forces many people onto entitlements (e.g. food stamps due to printing so much money, to protect the rich/system, that average people can't afford food). Entilements are to appease as the upper class plunders. You fell for the false narrative. This narrative is usually found on right wing radio, fwiw, but both parties love when people fall for it.
its the chicken or the egg debate. what cost more, welfare and social security, or QE and TARP? you might even say loss of jobs from outsourcing manufacturing has lead to people being dependent on entitlements. i dont know my mind is all fuzzy from working to long at my shithole of a job to think right now.
QE and TARP cost more, by about 200-400 million per year, depending which false figures we look at. This without even considering all the corporate welface, tax breaks for wealthy, etc. Also, QE and TARP policy represses the poor further so they become more reliant on government. Then citizens blame them, instead of the people perpetrating these policies. Social Security doesn't repress the rich, yet QE and TARP repress the poor. The middle class will always be screwed and pay for both extremes, but which extreme is better to pay for? Truly poor/needy, or rich who just want society to protect their assets via socializing losses? Soon there will be no middle class, so it's moot. Both extremes (poor and rich) will collapse then. But to hate on disabled people, old people, and call them "free shit army" is disrespectful. What is interesting is how the rich can influence opinion and make people turn on the poor/needy rather than them. This is similar to how smart, good people began killing Jews. When an influential party chooses a scapegoat people buy in. It is called "Appeal to Authority" and is a classic logical fallacy. There is also confirmation bias, ingroup bias (i.e. all libertarians hate entitlements), negativity bias, etc. There is so much fallacy in the claims nobody can see the forest from the trees, and the underlying assumption somehow becomes people on entitlements are lazy and keeping society down, and the rich create jobs and raise everyone up from their bootstraps. The truth is far from any of that.
fucking old people... going to go punch my grandfather in the face. 93 yearold freeloading son of a bitch. get off your damn respirator and work, slacker.
https://www.youtube.com/watch?v=uPsbDUZvfFo
That guy Devo drones on a bit.
But if you had put the S/ on your text I guess you would have had extra points here.
Looks like Irony or Sarcasm to me. I didn't click on the link since I don't know maybe Youtube is just as locked down as Google.
word
it links to a happy gilmore clip where ben stiller tells the old lady she just earned landscaping duty. fucking hularious
Thanks. Hey that Devo guy makes good sense today.
You just reminded me of that guy Prober.
Reminds me of the EU fools that are buying US LT Treasuries:
(http://www.treasury.gov/ticdata/Publish/mfh.txt)
Last Data is from December 2014.
Belgium 2002 = $10.8 B, then 2013 = $163 B, Today $335 B
Bermuda 2002 = $14 B, then 2013 = $94 B, Today ??
Cayman Islands 2002 = $10.7 B, then 2013 = $66 B, Today ??
Canada 2002 = $8.4 B, then 2013 = $46.6 B, Today $69 B
China 2002 = $95 B, then 2013 = $1,272 B, Today $1244 B
France 2002 = $11 B, then 2013 = $42.4 B, Today $79.2 B
Germany 2002 = $38 B, then 2013 = $54 B, Today $72.7 B
Hong Kong 2002 = $37 B, then 2013 = $89 B, Today $172.6 B
India 2002 = $5.2 B, then 2013 = $56.6 B, Today $83 B
Ireland 2002 = $6 B, then 2013 = $91 B, Today $138.6 B
Japan 2002 = $260 B, then 2013 = $1,023 B, Today $1231 B
Luxemburg 2002 = $20.2 B, then 2013 = $107 B, Today $172 B
Mexico 2002 = $16.7 B, then 2013 = $52.7 B, Today $84.8 B
Norway 2002 = $5 B, then 2013 = $74 B, Today $81.6 B
Philippines 2002 = $3 B, then 2013 = $36 B, Today $40.6 B
Poland 2002 = $7 B, then 2013 = $31 B, Today $27 B
Russia 2002 = $3 B, then 2013 = $138 B, Today $86 B
Singapore 2002 = 19.4 B, then 2013 = $82 B, Today $110 B
Switzerland 2002 = $28 B, then 2013 = $157 B, Today $190 B
Taiwan 2002 = $0 B, then 2013 = $183 B, Today $175 B
Turkey 2002 = $2 B, then 2013 = $18 B, Today $77 B
United Kingdom = $45.7 B, then 2013 = $130.6 B, Today $189 B
And seems foreigners invest in the US More than our Domestic Private Investors.
http://www.bea.gov/newsreleases/international/intinv/iip_glance.htm
Mortgage rates tend to correlate to the 10 yr. Overall, lower rates are what I think is pushing up housing prices. The ability to purchase within your debt ratio puts people into homes. Once the rates go up and financing is no longer easily available, housing prices tend to go down. There will always be outliers in this market, as is the case with Detroit. Cash buyers start coming in force when rates go up due to it being no longer as profitable to own a mortgage.
Cog, I was on the bus going downtown in Nanchang when this 30ish guy starts talking to me about buying real estate in Detroit. I kid you not. He was fired up about parking his cash in a hard asset outside of China. I thought at first it was all a big joke but this guy wanted to know everything he could about Detroit. I asked him if he eventually wanted to live in one of these houses he owns. Of courses, he replies. Ok, lets talk about a concealed carry permit. While I was explaining concealed carry he kept on asking why is this important to know. I was just messing with him because it was so surreal to be on a bus in China talking to a guy who is acting like he just finished one of those get rich with real estate seminars. I kept thinking any minute he's going to show me the hidden camera and tell me I'm on Candid Camera.
At the end of the day, artificially inflated housing markets are underpiining a way oversold municipal bond market that craters nationwide as soon as property values are "marked to reality"
I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... www.globe-report.com
Let's talk about home prices once rates settle back to their historical averages...
hint: keep your powder dry
edit: who am I kidding, home prices will be the least of your concern
This is true in my area. Six and seven hundred thousand dollar houses, and McDonald's hiring shift managers.
Something doesn't compute. I think it hits the wall here this year.
Crash this phucker already, damn!!
recovery
Housing Bubble Part II
"Nobody could have seen this coming...."
(various assclowns on the BlowHorn)
http://www.zillow.com/visuals/negative-equity/#13/40.7653/-74.0113
Well I like other charts:
-
Manufacturing:
http://research.stlouisfed.org/fred2/series/MANEMP (12 Million down from 19.5 Million) All Employees: Manufacturing Top was 1979.
Existing Home sale & Home Prices:
https://research.stlouisfed.org/fred2/series/EXHOSLUSA495S Existing Home Sales©, Annual, Seasonally Adj
https://research.stlouisfed.org/fred2/series/EXHOSLUSM495S Existing Home Sales©, Monthly, Seasonally Adj (better)
If the mean sales price is around $200K, then this seems a poor indicator for the economy since those at the bottom are not in recovery mode.
Existing Home Sales in West Census Region©
2014-12: 1,120,000 Number of Units, Monthly, Seasonally Adjusted Annual Rate, EXHOSLUSWTM495S, Updated: 2015-01-23
https://research.stlouisfed.org/fred2/series/EXHOSLUSWTM495S
Existing Home Sales in South Census Region©
2014-12: 2,170,000 Number of Units, Monthly, Seasonally Adjusted Annual Rate, EXHOSLUSSOM495S, Updated: 2015-01-23
https://research.stlouisfed.org/fred2/series/EXHOSLUSSOM495S
Existing Home Sales in Midwest Census Region©
2014-12: 1,090,000 Number of Units, Monthly, Seasonally Adjusted Annual Rate, EXHOSLUSMWM495S, Updated: 2015-01-23
https://research.stlouisfed.org/fred2/series/EXHOSLUSMWM495S
Existing Home Sales in Northeast Census Region©
2014-12: 660,000 Number of Units, Monthly, Seasonally Adjusted Annual Rate, EXHOSLUSNEM495S, Updated: 2015-01-23
https://research.stlouisfed.org/fred2/series/EXHOSLUSNEM495S
-
New Houses Sold by Sales Price in the United States, Between $300,000 and $399,999
2014:Q4: 22 Thousands of Units (Below 2002 Levels)
Quarterly, Not Seasonally Adjusted, NHSUSSP30T39Q, Updated: 2015-01-27
https://research.stlouisfed.org/fred2/series/NHSUSSP30T39Q
New Houses Sold by Sales Price in the United States, Between $150,000 and $199,999
2014:Q4: 15 Thousands of Units (No recovery, Below 2008 Crash Level)
Quarterly, Not Seasonally Adjusted, NHSUSSP15T19Q, Updated: 2015-01-27
https://research.stlouisfed.org/fred2/series/NHSUSSP15T19Q
New Houses Sold by Sales Price in the United States, Under $125,000
2014:Q4: 2 Thousands of Units (No recovery, Below 2008 Crash Level)
Quarterly, Not Seasonally Adjusted, NHSUSSPU12Q, Updated: 2015-01-27
https://research.stlouisfed.org/fred2/series/NHSUSSPU12Q
Thanks for the chart porn, you should be granted permission to post the visuals by the Tylers.
Thanks. I really think I see how righteous the bankers are acting (in a bad way). Like the statement that they are doing God's Work.
What gives them the right to make Housing Bubbles so that we have to waste money on Inflation, on Interest Rates, and on Fees for closing the sale, and you sign over all kinds of stuff to them. They are making instant money, but you are on the hook even if you are under water in a few years.
Bankers have privileges that should be held back from anyone.
And we really need to blow the doors off the US Banking and Finance Industry to see where they are profiting and not getting punishment, getting incentives for writing fraudulent reports, buying false Financial ratings, cooking the books for Audits, making their own accounting rules and banking rules, getting special FED Privileges.
And they take no responsibility for Being Bailed Out Like GM or GE.
They make a big mess leaving Tax payers to pay for it. But we are already paying them for housing, auto loans, School loans, Credit Cards.
It is just Patriarchy.
Who do they think they are??
Elites
The gig will be up soon.
that's "jig"
Thanks for the links. Nice work ;-)
Thanks. I see Existing Home Sales now below 1998 Level. I didn't really see that before. It helps to review.
Wow, 10:38, FRED Charts down for Maintenance, don't know if it is cause of ZH Referrals or what...
10:44 FRED Charts still down...
10:50 FRED Charts still down...
10:55 FRED Charts still down...
11:03 FRED Charts are up, no problem.
its obsurd to think that there is pretty much a static number of people, goods, and services. this number doesnt change as much as you would think. the only thing that changes are the decimal places on a piece of paper written down by a select few that determine the fate of millions of americans well being.
The housing bubble doesn't have much more to go if rate hikes are on the table. (I know they aren't coming but even in 2007 taking rates from 5 down to 0 couldn't stop the collapse)
what seems to be conveniently left out is a chart of interest rates. i call bullshit again.
we should go back and overlay rates for p and i per 100k and factor that in.
we buy a payment, with all else relative. fuck this bullshit. almost msm malipulation of thoughts. come on zh, tyler, you know better...
Yeah, I bet Houses cost double what prices they sell for after the Mortgage is paid off... and it is still true if they upgrade to a bigger house later before paying off the existing mortgage.
Then there is the Labor situation. No one talks about the cost of keeping Labor Force so high with the Black Market. No wonder good American kids get involved with Illegal Activities since they can't easily compete for jobs, even restaurant jobs.
- BORDER BATTLE:
- Hispanic activists organizing in favor of tougher immigration enforcement...
- Professor: Will GOP stand up to Silicon Valley oligarchs?
- VIDEO: Gutiérrez booed off stage at Spanish-only immigration event...
- Half of all Boston youth now have foreign-born parents...
- One in eight illegal immigrants in USA now has white-collar job...
In Canada, the big story is the housing crash in Alberta with the sell off in oil.
I created the chart from data that I extracted from Greg Poelzer's Macdonald-Laurier Institute's February 2015 Publication Paper "What Crisis? - Global lessons from Norway for managing energy-based economies."
http://www.chpc.biz/history-readings/ripped-off
"Alberta's so called "progressive" conservative governments; 7 consecutive iterations since 1971, have squandered their provincial energy resources..."
USA had those big time too in Denver and Houston.
I don't know the business though so I can't predict which cities will crash... first housing, then Offices, Empty Office Space.
Can you link to the chart you refer? "I created the chart from"
Come to Sunny Melbourne Australia where
The Wage home price appreciation versus Wage growth chart
will blow your mind......
You'll see the engineers and tradesmen under the bridge drinkin' mad dog, whilste Ebby Halliday's bimbo army speeds 'round town in their BMWs and Mercedes, trying to make lunch on time with the bank representatives. I lived through it, barely. Now I'm more concerned with onions and bread, can't really afford beer anymore. "Love it or leave it" they told me. Too old to leave now.
Come to Sunny Melbourne Australia where
The Wage home price appreciation versus Wage growth chart
will blow your mind......
UK has had big problem with Expensive Housing bubble with people on fixed income living in crap apartments only to get kicked out when they get sick and can't pay bills.
I don't live there, but I guess buying Real Estate in UK was a way to make money for a long time.
Which is why I laugh when we implement Trade Policy and Financial Policies that Follow the British Raj.
- British Raj wants low Labor costs
- Want to use Labor overseas
- Want cheap shipping to leverage Resources & Cheap Labor overseas
- But they want to stimulate the economy through helping people buy expensive houses
Low wages & Expensive Houses a Dynamite of a combination.
S/
Well the Chinese and Russians are buying US homes to park cash. So wages don't matter (for now).
Big story of Latinos and Brazilians buying in Florida too.
Many actually don't know or acknowledge that people in the US actually have the cash and are only sitting on it. It comes out when the rates go up. When the hikes happen, purchase loans drop off and cash purchases go up. This happened towards the end of 2013 and cash buyers became 60% of the purchase market.
Ah Cash Real Estate Purchases
- From 2009 we do see a US recovery of...Cash Sales of US Houses... don't know how to interpret this... could be Brazilian Millionaires or Drug Lords... lots of possibilities... Looks like Outside Money, Foreign Money is propping up the USA
- would be great to start a Reform Movement for US Government, US Mortgage Finance, Us student finance, US Fiat, US Banking, US Corrupt Accounting and Financial Ratings...
https://research.stlouisfed.org/fred2/series/HSTFC Houses Sold by Type of Financing, Cash Purchase
https://research.stlouisfed.org/fred2/series/HSTFVAG Houses Sold by Type of Financing, VA Guaranteed
https://research.stlouisfed.org/fred2/series/HSTFFHAI Houses Sold by Type of Financing, FHA Insured
https://research.stlouisfed.org/fred2/series/HSTFCM Houses Sold by Type of Financing, Conventional(Peak 2005)
-
Cash Finance Housing might be a sign of Weakness if you have today's Economy... like rich people doing the buying, or like Drug lords doing the buying... or why are Americans using off shore money to buy houses in the USA in a time of Weakness????
Sold my house in 2013 that I could afford for 20% less than I paid in 2009 to move for a new job because the company I worked for went out of business.
Now I live in a shithole house I am renting for $1200 a month and have no way of affording any home in the area. Homes in areas taken over by the mexican drug cartels are attempting to sell for $175k. The banks own them and they are unwilling to take less. So instead of anyone buying them and trying to rehab the area, they sit there rotting with meth labs in the basement and latino gangs throwing parties up top.
Unless you make over $150k a year you can't even think about looking in any decent town. Real Estate is a joke. Everything going on right now is a sick fucking joke.
I wonder how long this will go on.
Low wages, high Housing Prices, No Savings Interest Rates for CDs or money in Savings Accounts, No Safe way to make Investment money unless you sell drugs...
Plus clearly USA & EU & NATO are working on a big Plan of some kind which will bankrupt the USA totally.
There will be a new Super Power 20-30 Years down the Road and USA will suffer since our people are not that smart. Or else a lot of dumb people will die off. I wonder if the plan is to install Israel as the New Super Power after collapse in the USA. Like one year a bunch of people work in the Middle East and live in the Middle East where their MIC, oil or Engineering Jobs are. Maybe High Tech will move to Pax Israel in 20 Years.
But probably Power doesn't disappear. We will still have Elites in Washington DC & Wall Street after the Collapse... even if most people are poor and hate the government it will be like the UK. Nasty power players will still control the police and states.
Dystopian Vision of North American Union and New Israel.
The banks wont let them go because THE BANKS PROBABLY RUN THE METH LABS.
Have to get the bankers to take title to all the property in order to fix this eh?
What doesn't outpace wage growth?
the only number that matters is median income on what side of 33% of median home price sold.
http://money.cnn.com/2015/03/26/real_estate/home-affordability-real-esta...
Never kept a house long enough to find out - bitchez took 'em