Home Prices In All US Cities Grow Faster Than Wages... And Then There's Seattle

According to the latest BLS data, average hourly wages for all US workers rose at a respectable 2.9% relative to the previous year, if still 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 a little over 2%, according to the latest Case Shiller data, every single metro area in the US saw home prices grow at a higher rate, while 15 of 20 major U.S. cities experienced home price growth of 5% or higher, something which even the NAR has been complaining about with its chief economist Larry Yun warning that as the disconnect between prices and wages hits record wides, homes become increasingly unaffordable. Paradoxically - the higher prices rise, the more unaffordable US homes become for the average American as we showed this weekend. In fact, as of this moment, homes have never been more unaffordable, which even more paradoxically hasn't stopped priced from hitting new all time high virtually every month for the past year.

And while this should not come as a surprise, one look at the chart below suggests that something strange is taking place in Seattle where prices soared by a bubbly 13.2% Y/Y, and 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.


takeaction Tue, 10/31/2017 - 10:50 Permalink

Hourly earnings??  There is an old wise saying...If you know how much your making an hour...your not making enough.If you Rent.... get a W-2 AND Finance shit...this is the TRIPLE doom...can't help ya.

Haus-Targaryen takeaction Tue, 10/31/2017 - 10:52 Permalink

I remember driving from Vegas to LA back in 2010 and looking at all the neighborhoods south of the Strip ... partially built, abandoned, boarded up ... I thought to myself "Man crazy how this all worked out ... feel sorry for anyone who own one or two of those things." haha jokes on me.  Each one of those things now is worth $300k plus.God I hate funny money. 

In reply to by takeaction

ejmoosa Tue, 10/31/2017 - 11:09 Permalink

Check out Seattle's Comprehensive Land Use plan.  They are packing them in with urban centers...they are also seeking all sorts of SJW objectives. Of course prices are gonna go through the roof there... http://realestategals.com/2035-seattle-comprehensive-plan/ This Urban Village Strategy has been in place for the last 20 years, and the new Comprehensive Plan will build upon its successes. The new Plan tries to adhere to Seattle’s core values (Race and Social EquityEconomic Opportunity and SecurityEnvironmental Stewardship, and Community), all while keeping an eye—two eyes—to sustainability.

pitz Tue, 10/31/2017 - 11:11 Permalink

Seattle has a high concentration of "landlord families", particularly of the Indian ethnicity, that are pac-manning as much property as they can on credit to rent to the Amazon/Microsoft H-1B crowd.  Similar deal along the west coast.

jbwilson24 pitz Tue, 10/31/2017 - 21:40 Permalink

And in Toronto.Racking up rental houses and committing insurance fraud are Indian specialties. Horrid people.But smart strategy. they live together, pool their resources and buy a home. Then another home. Then another. They also buy small motels.Big benefit of extended families that live in the same place. You can pool money.White people better start to do this, because they are being outcompeted.

In reply to by pitz

rorik Tue, 10/31/2017 - 11:26 Permalink

Working in title in Seattle..... Chinese cash is definitely one of the reasons for the rise in prices. I see cash deals every few days. And I'm only one desk at one company.

VZ58 Tue, 10/31/2017 - 11:33 Permalink

Seattle is heading the same way as Vancouver and SFO etc - no average American will be able to live there soon unless you have a highpaying tech job. And that is everybody, right? 

CJgipper VZ58 Tue, 10/31/2017 - 11:39 Permalink

you know, when they say "high paying tech job", they're talking about 90k or 100k, right?  Barely enough to live on in these high rent, high tax areas. I wonder if these needed income projections account for the sky high exponential taxes as you move up income brackets to buy these median houses.

In reply to by VZ58

Promethus Tue, 10/31/2017 - 13:50 Permalink

Why do TPTB mindlessly applaud rising home prices like monkies on crack. Housing affordability is the problem and bigger mortgages is not the answer 

bigrooster Tue, 10/31/2017 - 14:45 Permalink

Detriot a 61% increase is needed...WTF?  Is that because most of the black population has no job?  Houses in Detroit were almost free in 2009/2010. 

vladiki Tue, 10/31/2017 - 20:02 Permalink

As usual, it's just supply and demand ... though "supply" is not just supply of houses, but supply of CREDIT . And those with easy access to cheap credit and the trillions of official counterfeit (QE etc) i.e. the rich and corporates, are vaccuuming up accomodation where it's nicer to live. In our increasingly Winner Take All world, more and more of humanity is concentrating in fewer and fewer places.The new ability to rapidly MOVE people AND CASH anywhere is what's created this unhealthy polarisation and the relative price shifts. The early movers are just asset squatters. They've added no value to earn their reward. The late movers keep paying the price. It's grossly unfair and antisocial, but even in the absence of govt intervention (already occurring in some countries) or recession (inevitable and overdue) it won't continue for two reasons. First: the best spots will be "loved to death". Second: the limiting factor on rent and home prices is CAPACITY TO PAY, and in the absence of endlessly falling interest rates, that is effectively finite.

InnVestuhrr Tue, 10/31/2017 - 21:28 Permalink

Seattle area also has HORRIFIC traffic - if you buy a house there you will end up spending most of your life in idle on the clogged roadways, NOT in your too expensive house or not-paying-enough job.

jbwilson24 InnVestuhrr Tue, 10/31/2017 - 21:45 Permalink

Yes, it is getting worse every month. Tech people who can come in at 10:30 are okay, but you get trapped untli 7:30pm going home. The 405 and i5 can clog up fast.Unlike the Bay area, it never really ceases. The 101 and 237 in the south bay actually are wide open on weekends. (Not the drive through the mountains to santa cruz though). In seattle the i5 is bad all the time.

In reply to by InnVestuhrr