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

According to the latest BLS data, average hourly wages for all US workers in November rose at a stubbornly low 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 4.1% 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 - considering we have pointed it out on numerous occasions in the past - 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. Also worth keeping an eye on: price appreciation in Sin City has quietly surged in recent months, and in September home prices surged 10.2% Y/Y, the only other double digit price increase in the US after Seattle. Considering that Las Vegas was the epicenter of the last housing bubble when prices exploded higher only to crash, it may be a good idea to keep a close eye on price tendencies in this metro area. 

Confirming the recent jump in home prices, at the national level in Octoner home prices for the Top 20 metro areas rose 6.4% YoY according to Case Shiller, the fastest rate since June 2014. As Bloomberg adds, "a lingering shortage of previously owned homes is keeping housing prices elevated. That’s allowed homeowners to recover the equity lost during the housing collapse and recession a decade ago."

“Home prices continue their climb supported by low inventories and increasing sales,” David Blitzer, chairman of the S&P index committee, said in a statement. But that climb may be interrupted by the Federal Reserve hiking interest rates next year, he said. “Since home prices are rising faster than wages, salaries, and inflation, some areas could see potential homebuyers compelled to look at renting."

Meamwhile, for those looking to buy for the first time, conditions are less favorable. Growth in property values is outpacing wage gains and limiting affordability, representing a headwind for the market.

Finally, 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.

 

Comments

TheSilentMajority Tue, 12/26/2017 - 09:57 Permalink

Selling your lands to foreigners is not exactly great for your citizens looking to buy a home.

Maybe it is time to stop foreigners from buying and your lands? Perhaps expropriation of foreigner owned properties will soon be necessary?

Whatever happened to “Americans first”?

TrajanOptimus nscholten Tue, 12/26/2017 - 10:43 Permalink

Home prices will fall when interest rates are raised.Raising interest rates will be the FEDS way of stealing your equity. High home prices will not be sustainable when interest rates rise. The two can not co-exist in the marketplace simultaneously.May be a good time to cash out those real estate investments..... All that fake money that was created in the stock market will need to go poof someday... Sooner or later.

In reply to by nscholten

rrrr Gap Admirer Tue, 12/26/2017 - 10:52 Permalink

This is inflation. US dollars are coming back into this country, and it is going into stocks and other assets, causing the prices to go higher. There might not be a crash. Such dollars are large in numbers, and they have been coming back for several years. If asset prices continue to climb, more and more dollars can be consumed thereby. This is possibly a way in which the obvious appearance of inflation is being avoided. But relative to the increasing price of assets, the perceived value of dollars is necessarily decreasing. That is inflation. If the prevailing dominators continue to desire that the bitcoin phenomenon cease revealing that the dollar is becoming weaker, and also that a lot of people are desparately seeking a safe haven for their wealth other than in the US dollar, and if they are unable to control bitcoin and other cryptocurrencies, then they will eventually understand that they need to allow gold to find its true price among people with money. I am not a professional economist. I am not qualified to give investment advice. I am also not a professor of economics compromised by holding a professorial chair sponsered by self-serving egoists who want their own views espoused instead of the truth, and therefore I can say what appears to me to be sane. Temper this with your own acid and antifreeze. There. That's what I wanted to say.

In reply to by Gap Admirer

nuerocaster rrrr Tue, 12/26/2017 - 16:13 Permalink

Why! Stupendous global and national wealth transference systems. They want to keep them intact and stay in control.What might happen to the net tax receivers club, the leverage club, the monopoly club, the crime syndicate imperialism club if the reserve currency was brought into doubt or the sustainability of the capital structure(debt)of western nation states and major institutions were questioned? Capital Flight? Politicians, bureaucrats, bankers losing jobs? Demands for clawbacks? Revolts?There are quite a few people on the wrong side of wealth transfers. They're mostly ignorant, cowardly, and lazy(not that they don't have a high opinion of themselves) but you never know. 

In reply to by rrrr

Theeconomist rrrr Tue, 12/26/2017 - 16:11 Permalink

Those dollars aren't "coming back", they are already here.  When Apple parks foreign cash, it doesn't put paper money into a vault, it loans it out in an international market for money.  They are then free to borrow as much of it as they want here, at what is probably a lower interest rate than they the one they are getting loaning the money, making loaning it there and borrowing it here a cost free transaction. When the cash is repatriated, what difference does it make?

In reply to by rrrr

pitz Theeconomist Tue, 12/26/2017 - 19:30 Permalink

Very true.  In Apple's case, their "offshore" cash is managed by Braeburn Capital, in Reno, Nevada, invested in US dollars, in US treasuries, in US investments.  The only thing is, the 'title' to the cash is with a foreign subsidiary of Apple.  Hence, the 'money' is already in the United States.  The reason its not being invested in factories, etc. in the US is that US manufacturing is completely uncompetitive with China and elsewhere.  The whole idea being sold by the political types and even companies themselves, that cash is actually 'offshore', conjures up images of vaults of foreign cash in foreign lands, but nothing could be further from the truth.

In reply to by Theeconomist

pitz shankster Tue, 12/26/2017 - 14:54 Permalink

In Seattle/San Francisco/Vancouver, there's "landlord families", primarily Indian-Americans, who buy up large numbers of housing units on heavy amounts of credit, and rent them out as a 'business'.  Seattle, particularly, has a lot of H-1Bs (as that's basically most of what Amazon/Microsoft hires), and they rent from said individuals.

In reply to by shankster

Man-Bear-Pig pitz Tue, 12/26/2017 - 19:13 Permalink

The properties in Canada are owned by the temple which are tax free assets.  The families pay the temple getting the "charitable" tax deduction in order to pay off the "loan".It's a big fucking scam.  If it where whites and/or a Christian church it would be illegal.

In reply to by pitz

Man-Bear-Pig pitz Tue, 12/26/2017 - 19:13 Permalink

The properties in Canada are owned by the temple which are tax free assets.  The families pay the temple getting the "charitable" tax deduction in order to pay off the "loan".It's a big fucking scam.  If it where whites and/or a Christian church it would be illegal.

In reply to by pitz

Endgame Napoleon Bay of Pigs Tue, 12/26/2017 - 11:06 Permalink

I know the high-income parents who are looking to buy homes are the only people who count in this country, other than the single moms with their part-time jobs that keep them below the earned-income limit for monthly cash assistance, free EBT food, free Rent in Section 8 or reduced-cost Rent in mixed-income apartments that are in safer areas than most college grads can afford, in addition to their refundable child tax credits up to $6,444. They, along with their immigrant counterparts who stay below the traceable, earned-income limit for welfare with a male breadwinner’s income, can afford Rent despite the available low-paying, part-time, temp and high-turnover jobs.

They can do that due to their pay-per-birth freebies from government that increase with greater womb productivity.

But MANY millions of non-welfare-eligible, non-womb-productive citizens exist, nonetheless, and we have to worry about the skyrocketing cost of Rent that eats more than half of our non-welfare-augmented, non-child-tax-credit-boosted, earned-only income. This is a big group of near-100% un represented citizens in a so-called Republic, with the childless citizens over 40 constituting almost a third of the US population at 28%.

Since the average SS-retirement check is $1,300 — and since fewer Americans retire into paid-for homes, unlike the married, one-earner households of past eras — Rent affordability even applies to retired individuals. They have only negligible amounts of access to housing assistance, compared to the womb-productive citizens and noncitizens, and younger, low-wage workers who have no children to add pay-per-birth bills to the household have ZERO access to housing assistance and near-ZERO access to food assistance.

When you count the childless-for-now youth, about a third of whom will always be childless, a much higher number of Americans must concern themselves with Rent, not with what a dual-high-earner couple, taking two of the few decent-paying jobs with benefits made possible by a $260-billion employer tax exclusion out of the economy, will pay for their dream house. Sure, professionals should be able to afford a house, but bigly numbers of citizens cannot even afford Rent.

Most of us are renters and always will be, and many of us are renters in states where per capita income — NOT family income — is between $18k and $20k. Why is the RENT “too damned high?” Are Chinese people buying single-family homes in the American South? Is that reason for apartment rent that consumes more than half of the earned income of single / childless citizens, noncustodial parents and single moms with grown children who have no spousal income and no unearned income from welfare and child tax credits to reward sex and reproduction?

In reply to by Bay of Pigs

BarkingCat Bay of Pigs Tue, 12/26/2017 - 14:24 Permalink

Good. I own a house in Seattle and hate this fucking city with a passion.  I am doing some upgrades and remodeling and hope the bubble will continue while I work on the house so that I can sell it at some insane price and get the fuck away from this area.It would be a twofer to sell the house and then month later the big earthquake hits and levels the city.

In reply to by Bay of Pigs

pitz Bay of Pigs Tue, 12/26/2017 - 14:55 Permalink

Your friend is factually incorrect, especially in Seattle where "Chinese" participation isn't even visibly apparent.  Unlike Vancouver which has a decent Canadians of Chinese ethnicity population that can be mistaken for foreign nationals.  Evidence of foreign participation along the entire west coast is minimal to non-existent.

In reply to by Bay of Pigs

all-priced-in Tue, 12/26/2017 - 10:00 Permalink

Got to "lock in" the high price before interest rates on 30 year mortgages go up - It is the housing equivalent to 0% APR for 72 months on a $60,000 F-150.  

Endgame Napoleon all-priced-in Tue, 12/26/2017 - 11:29 Permalink

Before you do that, make sure that you do not have a high-turnover job that will not enable you to sustain a mortgage over time (or Rent), regardless of how hard you work or how high your numbers are.

Make sure you have one of the crony-parent jobs, where moms can take off whole mornings, whole afternoons, whole days and whole weeks — going far past their PTO and pregnancy leaves — as long as they attend the Family Day Picnic and participate with maximum enthusiasm in the Baby-Mommy-Look-Alike-Bulletin-Board-Decorating Contest and the Halloween Dress-Up Day [when] at work.

Well, to afford a house, you need to be the manager, planning and presiding over all of that “professionalism.”

Such a manager is married to another high earner in almost all cases.

During such a manager’s frequent and excused babyvacations, s/he needs to hire chumps, often childless, who come to work every day, stay the whole day and keep the sales generation and account-retention numbers up during the babyvacationing of managers and most staff so that the manager gets her / his bonus.

Meanwhile, the 98% childbearing-age-mom staff — with their spousal income, their child support that covers rent or their monthly welfare that covers rent and food and their refundable child tax credits up to $6,444 — can back watch for you while leaving work constantly themselves.

You need to get the credit with the higher ups for keeping labor costs down by hiring / retaining almost all childbearing-age moms who are able to work for rock-bottom pay due to their unearned income for womb productivity from spouses or government.

In reply to by all-priced-in

evokanivo Tue, 12/26/2017 - 10:01 Permalink

Rents are horrible in Seattle. All the tech-related jobs create a dichotomy in terms of purchasing power and basically if you're not making 100k+ you're out of luck.That and the zoning laws. Zoning laws prevent taller-buildings - intended to keep the 'character' of the city. As a result, high-density housing doesn't get built, and people have to co-habitate while paying nosebleed prices.

Kurpak evokanivo Tue, 12/26/2017 - 10:55 Permalink

The real ticking time bomb in Seattle is the infrastructure.  A city with roads and highways built to service a population of about 200k trying to handle the insanity that we have today. Everyone is bitching about the housing costs but completely ignoring the fact they have to actually drive to that new shiny cheap house they keep begging the local marxist .gov to legislate for them. Total insanity, anyone with half a brain will gtfo of this socialist ratmaze experiment asap.  Seattle could be a great city, but they need to drop all this bike lane war on cars liberal crap and go full manhattan project and immediately:Fix I-5 from Portland to Seattle to Vancouver.  This is one of the busiest highway shipping lanes in the US and you have this gay bottleneck down to 2 lanes through the Seattle downtown core. That means demoing those skyscrapers through there and making it 5 continuous lanes in both directions all through downtown. I don't care about the cost suck it up. Same goes for the rest of the route down to Portland and up to Canada.  You can either do it now while it's kind of cheap and your .gov investment bonds are at an all time high, or wait another 10 years until the vehicles just sit on the freeway not moving and it will cost you 10x as much after the market corrects and you're dead broke. Their current plan is adding more traffic signals and bike lanes through downtown, and spending the remaining millions on the homeless and a few more buses. Oh there's that light rail thingy too, mission accomplished.  If you live in Seattle, leave.  If you're planning on moving there, don't. I wonder how much bilboards in SeaTac\Tacoma, Austin, SF, and LA would cost with that message?  

In reply to by evokanivo

Endgame Napoleon evokanivo Tue, 12/26/2017 - 12:15 Permalink

Seattle hires a lot of young people who live in groups of unattached, post-college-age youths or young couples, living in sin as we used to say in the South.

Thing is.....

Rent in the “low-cost” South is just as insurmountable, especially given the garbage-can-scavenging per-capita income in the South. When your monthly take-home pay as a multi-licensed insurance agent with a college degree is $1,400 per month, an $859 one-room or one-bedroom apartment leaves you little left over for food, etc.

Even if you are making the big $25k, like I did at the Department of Human Services, where moms and immigrants on food stamps left there with more than my weekly take-home pay in just EBT, rent is not much more affordable as a single, childless citizen.

Have a more practical degree than mine in, say, finance? Work at Wells Fargo, making the big $28k, but again, you will have trouble affording rent while maintaining a decent quality of life....in....the....South, with its affordable housing—NOT, unless you mean the dual-high-earner parents, looking to buy a comparatively affordable [palace] to house their progeny.

Seattle — per capita income — $22,973

https://en.m.wikipedia.org/wiki/List_of_Washington_locations_by_per_cap…

Okay, the rent is higher — but not that much higher — than in the South: https://seattle.craigslist.org/kit/apa/d/definitely-the-best-one/642398…

Kentucky — per capita income — $18,093

https://en.m.wikipedia.org/wiki/List_of_Kentucky_locations_by_per_capit…

Here is a one-bedroom apartment for $956 per month — https://louisville.craigslist.org/apa/d/huge-1-bedroom-with-attached/64…

Here is a one-bedroom apartment for $999 per month — https://louisville.craigslist.org/apa/d/your-new-home-awaits-in-the/643…

I have a feeling the one-bedroom apartments for around $700 per month — which is still unaffordable when working most low-quality / churn jobs in the South — are located in dangerous areas of the city.

You, as a full-time worker and single/childless citizen, pay half (or more than half) of your monthly, earned-only income to live in a dangerous, miserable, loud apartment.

A part-time-worker single mom whose grocery bill is also paid by taxpayers, in addition to monthly cash assistance and a $6,444 child tax credit, gets reduced-cost rent in a nicer mixed-income apartment in a safer area than you can afford or free rent in Section 8. Some of these $700-per-month-to-you apartments are probably located in unsafe areas with free-to-moms housing.

About the only way that you can afford a safe, one-room apartment is by eating low-quality food and consuming less than 1,000 calories per day. Even then, probably not.

Tennessee — per capita income — $19,393

https://en.m.wikipedia.org/wiki/List_of_Tennessee_locations_by_per_capi…

https://nashville.craigslist.org/d/apts-housing-for-rent/search/apa

Alabama — per capita income — $18,189

https://en.m.wikipedia.org/wiki/List_of_Alabama_locations_by_per_capita…

https://bham.craigslist.org/d/apts-housing-for-rent/search/apa

Mississippi — per capita income — $20,670

https://en.m.wikipedia.org/wiki/List_of_Mississippi_locations_by_per_ca…

https://jackson.craigslist.org/d/apts-housing-for-rent/search/apa

Such a weird state, where houses rent more cheaply than one-bedroom apartments in safe areas. The apartments that look nice, with reasonable rent in the $600-per-month range, are probably the mixed-income complexes, where single moms get a rent reduction per child produced, and builders get a per-unit [tax credit]. I wonder if there is something going on — government-wise — with these nice-looking houses that cost less to rent on a one-bedroom apartment. Some say rent to own, making me wonder if there is some kind of single-momma freebie there, too, but maybe not. It might just be owners, looking to make supplemental income. It might be those big investment firms, buying up houses all over the country. They may have some kind of deal with government to reduce housing costs for the [same group] getting multi government-financed monthly bills and refundable child tax credits up to $6,444: the sex and reproduction crowd.

South Carolina — per capita income — $18,795

https://en.m.wikipedia.org/wiki/List_of_South_Carolina_locations_by_per…

https://columbia.craigslist.org/d/apts-housing-for-rent/search/apa

Some of these are lofts — one room — in people’s homes, aimed at students.

https://columbia.craigslist.org/d/apts-housing-for-rent/search/apa

In reply to by evokanivo

BarkingCat evokanivo Tue, 12/26/2017 - 14:29 Permalink

Seattle has no character. It is the ugliest fucking city I know.The condo buildings going up around here are the most atrocious looking Creations ever.Additionally, people here have zero architectural taste.They take a beautiful Tudor house and put completely none comprable additions onto it.Yes, a brick tutor with a non matching dorner with clapboard siding is very common.Bunch of ugly Franken-houses all over the place.

In reply to by evokanivo

PT shankster Tue, 12/26/2017 - 10:35 Permalink

In my younger days I put in a hell of an effort to be a nice guy.  But after a few years of being a minimum wage slave, the idea of joining a gang of marauding-bandits-raping-and-pillaging-everywhere-we-go started looking VERY attractive.  Hey - look at the alternative.  I had no nice things, no women and was working my guts out just to stay alive.  Of course it looked attractive.  And this from someone who was trying to hold to the path of peace.  I often wondered how the "lesser mortals" kept it all together.Luckily things got better after that.  Or perhaps now I am just too tired.

In reply to by shankster