Home Prices In 80% Of US Cities Grow Twice Faster Than Wages... And Then There's Seattle

Tyler Durden's picture

According to the latest BLS data, average hourly wages for all US workers rose 2.5% relative to the previous year, well below the Fed's "target" of 3.5-4.5%, as countless economists are unable to explain how 4.3% unemployment, and "no slack" in the economy fails to boost wage growth. Another problem with tepid wage growth, in addition to crush the Fed's credibility, is that it keeps a lid on how much general price levels can rise by. With record debt, it has been the Fed's imperative to boost inflation at any cost (or rather at a cost of $4.5 trillion) to inflate away the debt overhang, however weak wages have made this impossible.

Well, not really. Because a quick look at US housing shows that while wages may be growing at roughly 2.5%, according to the latest Case Shiller data, every single metro area in the US saw home prices grow at a higher rate, while 16 of 20 major U.S. cities experienced home price growth of 5% or higher: double the average wage growth, and something which even the NAR has been complaining about with its chief economist Larry Yun warning that as the disconnect between prices and wages become wider, homes become increasingly unaffordable.

And while this should not come as a surprise, one look at the chart below suggests that something strange is taking place in Seattle, which has either become "Vancouver South" when it comes to Chinese hot money laundering, or there is an unprecedented mini housing bubble in the hipster capital of the world.

Putting the above data in context, here are two charts courtesy of real-estate expert Mark Hanson, the first of which shows how much household income increase is needed to buy the median priced home in key US cities...

 

... while the next chart shows the divergence between actual household income, and the income needed to buy the median priced house.

 

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NoDebt's picture

Remember the DotCom bubble?  Remember the housing bubble?

Well, we're doing both of them again simultaneously now.

But this time is different.  It will work this time.  Swear to God.

 

Ignatius's picture

How do you say, "It's the Chinese," in Chinese?

DWD-MOVIE's picture

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… http://disq.us/url?url=http%3A%2F%2Fwww.jobproplan.com%3A68UoF1LgzM-Yo3S...

Bay of Pigs's picture

Seattle's RE Bubble Part II will end just like the first one.

In tears and misery.

ejmoosa's picture

It takes a high price to get a seller out of their homes.  

That's what I am learning

Iskiab's picture

The economy has changed quite a bit, globalization has led to winners and losers depending on where you are in the country. Looking at median incomes for the nation and comparing it to regional prices is stupid. Instead compare it to regional incomes.

A good example of this is to look at house prices during the financial crisis in Seattle and San Francisco. There was no house price drop in those areas. If you want to see if the house prices are overinflated look at your local economy and whether there's still prosperity.

There's also a lot of talk of china investment increasing house prices but that's a load a shit too. It's local speculation and REITs that are increasing prices.

waspwench's picture

It's all about where the work is.

People move to locations where they can find work.   Once there, they need a place to live.

No work = cheap property.   Work = expensive property.

Quant Jockey's picture

So glad I got out of Seattle this year. The RE market is completely F'd up.

HardAssets's picture

You should see the 'apartments' new young college grads working for Amazon are getting in Seattle. Tiny places, huge monthly rents.

LawsofPhysics's picture

LOL!!  Seems sustainable...   ...NOT.

"Full Faith and Credit"

SillyWabbits's picture

It's like buying your own debt ceiling!

tmosley's picture

Central bank reallocation/misallocation of purchasing power away from capital (the source of wages) to assets via loanmoney.

The only way to stop it and maintain a fiat system is to end the central bank.

Otherwise, the market will have to adopt its own alternative--crypto.

Stan Smith's picture

+1 and many more.

Funny how many six-figure Fed jobs get featherbedding for them to fatten up.    And no sense of embarrassment.

"But hey, it's free"

rocmon's picture

I'd be sleepless in Seattle.

TBT or not TBT's picture

Selling in Seattle seems like a good plan. 

Byrond's picture

Seems pretty clear, here it is. The top two hip, liberal cities (Seattle and Portland) believe that Obama made the economy wonderful, so they're willing to pay the crazy high prices. Meanwhile, in reality, it's a bubble, and they're delusional. And it's like 2007 but way worse, because the incredibly higher rent prices are helping to create the housing bubble and the apartment building bubble, and it's all going to collapse any second. 

business as stusual's picture

Dude!!!!! It is so fucking amazing that you can make such sweeping blanket statements about the people of Seattle and Portland. Unfortunately just because your omniscient ass said it does not make it true. I strongly suggest you find out WTF your taking about, before you publicly demonstrate you complete lack of awareness, logic, and deductive reasoning.

FixItAgainTony's picture

Bro-ser, I live in Portland and it IS Obama worshiping, liberal lala land. See for yourself:
http://www.portlandmercury.com
http://www.wweek.com

HardAssets's picture

You did see lots of Obama and Hillery bumper stickers in Seattle. Just about zero for Trump. But then again, there are a lot of weenie passive-aggressive types there now who'd key your car or throw a brick through your window. So its not smart to have a Trump bumper sticker showing.

Seattle used to be a great blue collar town. The Cali techie types ruined it.

Gorgeous's picture

I'd say a "brick through your window" is more than passive-agressive.  Course, tying a passive-aggressor to a Trump-stickered bumper and dragging zhim/zher for a mile in the country is even better.

 

Hard to figure why the new money crowd turns progressive.  Happend to the Colorado over the last couple decades. It's not just CA.  But it's CA-like.

 

FixItAgainTony's picture

Indoctrination from politically frustrated instructors in so-called higher-education.

Jon Bong Jovi's picture

I live in New Orleans. We'd kill for some tech. They tried to dub us Silicon Swamp or some shit. GTFO, dumb fuckin' marketing fucks.

But who the fuck knows, I went to my fav porn site and i always see that "Step Sister Porn" is top trending porns. It's all good. I don't listen to it with the audio at work. It would be weird and all with my cube mate. Shit be weird bro. 

Quant Jockey's picture

I left Portland for the same reason I left Seattle. There are too few good jobs to support the inflated cost of living and the lunatic left has run both cities into the ground. DT Portland is mostly devoid of large businesses as they have left to escape the Multnomah county income tax and homeless people. The Pearl District is still pretty cool. but beyond that I wouldn't be caught dead there.

jbwilson24's picture

what are you talking about? he never made a deductive argument. Do you even know what that word means?

whoisjg's picture

you left the #1 out of the top 2. weird. san fran is and will be the #1 for ever

Decoy 409's picture

Yes the great illusion with tricks runing low. The 3 card monte game well run. However with a peak sale period prior to the first interest rate move and dead in the water after....... well give them some credit for trying to uphold that Gdp with a deceased credit chip ridden dollar.

Yep I am a calling 'DANGER CASHOUT/BANKRUN VIX 88' see we lost way more than 10bps since that 78 just a short back.

 

Good luck to all relying on unsound credit chips!

 

And keep those house prices up for the believers!

 

The great rollover to good old gmc to hide the mess hey. That's what ya call tripping on that pile (now) that kept getting swept somewhere! Foreclosure haven on it's way just like the good old days not to far back. Where can they roll them to next?

forestgump227's picture

If Seattle is a bubble, what does that make San Francisco and jew york?

Decoy 409's picture

And so much for the credit card coming out with a tril plus just so far this year burned up in credits. Wonder who backs all that for the good old credit givers???? Oh that's right! The 'BROKE" and fdic.

 

Well give some credit though as there have been more than enough part time service jobs provide in the mc d and bar arena to keep up with those costs hey!

Arrest Hillary's picture

Increase in minimum wage is driving this ?

sacredfire's picture

Yes, when the minimum wage increased from 7.50 to 15.00 per hour the increase made then eligible for million dollar houses?? Really???

ParanoidSquirrel's picture

I really would like to understand where all this money is coming from to create such home prices. Vancouver, ok, I understand, bunch of money being laundered out of China. But Dallas? Minneapolis? Boston? How is there people with money to buy homes at these prices?

ParanoidSquirrel's picture

So my understanding of QE, is that a bunch of money get's printed out of thin air, that money flows around the world looking for yields, thus it ends up on real estate. Does that about sum it up?

Do you have a better or more detailed explanation?

NEOSERF's picture

Boston for the first time in my memory is now hot money from China and MiddleEast...all the new $4000/mo apartments have Chinese or Middle East residents and many look like they could be full time 30yr old students..

ParanoidSquirrel's picture

In Denver, one explanation I have heard is the legalized marijuana shops can't deposit the cash into banks since those are federal, so then end up buying properties with it. Add on top of that all the people that move to Denver due to the legal weed, and there is a shortage of housing. Still doesn't explain how these people are affording the rents and mortgages.

Amazing to think that there are that many people from the ME and China with that much money driving up prices that much all over the world. Truely is a small world I guess.

pitz's picture

Little to no foreign money in either Seattle or Vancouver.  Its just the crazy locals and leverage.

jbwilson24's picture

Untrue. There is significant investment by foreigners in Vancouver. Estimates are 6-9% from university researchers etc. However, there are ways to buy homes through canadian corps, trusts, relatives, etc, that avoid showing foreign ownership.

Seattle, tons of chinese money moving into bellevue. 

YUou are right in general that the bulk of RE purchases in Vcr are by locals. 

NEOSERF's picture

Every company in the ealry 2000s offered standard 3% raises with 10% higher and 10% lower....after the crash, many companies offered no raises for years and people were just happy to have jobs.  In the "recovery" years, raises have been dropped to 2.5% and I guarantee you after the next crash, 2% or nothing ....factor this in on ridiculous valuations and a bag of groceries that easily costs $75 now.  Restaurants are dead as are apparel retailers...

onthedeschutes's picture

Add on top of that...a hundred thousand of college debt, no savings, big car loan, languishing paycheck...skyhigh rents, ridiculous RE prices.  The FED has done a stellar job of setting us up for a cataclysmic fall.  The bankers are really traitors against humanity.

Double.Eagle.Gold's picture

One of the ways people are coping with annual 10% increases in Real Estate is they don't own a car in Seattle.

They skip buying a car, choosing Uber or walking instead. For those few occasions where they want to go hike in the Cascades or Olympics five of them get together and rent a car for the weekend.

 

 

HardAssets's picture

There are lots of newly built high rise apartment buildings. Tiny, but expensive units. Shops at ground level. Plenty of new college grads working for the tech companies live in these. Its like an continuation of college dorm life.

"There will be, in the next generation or so, a pharmacological method of making people love their servitude, and producing dictatorship without tears, so to speak, producing a kind of painless concentration camp for entire societies, so that people will in fact have their liberties taken away from them, but will rather enjoy it, because they will be distracted from any desire to rebel by propaganda or brainwashing, or brainwashing enhanced by pharmacological methods. And this seems to be the final revolution” -
Aldous Huxley

TurtleSoup's picture

Re Huxley. Some of us didn't get the memo.

Mazzy's picture

I'm 30, have none of those debts and am thriving.  Trying to get some friends on board like "hey, ditch that big truck payment", but they just don't get it.  I've got a 35 year old friend trying to scrape together pocket change (as in, he literally took a change jar and paid a coindstar machine to turn it into bills for him because he had nothing else) for a trip.  It feels all the worse knowing that me makes more per hour than I do.  Where does all that income go?  I've been frugal as hell my whole life and everything seems to fall into place without much stress.

ParanoidSquirrel's picture

Years ago I remember my first job out of college, my budgeted weekly groceries, buying the things I liked and enjoyed was $25. A few years ago it was now $75. Any more I can't seem to get out of the store for less than $90. Same eating habits.... just costs more.

Herd Redirection Committee's picture

Used to be that ground beef and chicken wings could still be got for  a decent price.  Then everyone had to start eating chicken wings and ground beef.  Now those prices are up, oh, 40% in 4 or 5 years?

onthedeschutes's picture

Thank goodness they do not include real estate in the inflation calculations.  (<===sarcasm)

Anarchyteez's picture

I'm still trying to figure out what they do include.