Home Prices In 80% Of US Cities Grew 2x Faster Than Wages... And Then There Is San Francisco

The US housing market overheating. Again.

According to the latest BLS data, average hourly wages for all US workers in November rose at a relatively brisk 2.7% relative to the previous year, if 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 crushing the Fed's credibility, is that it keeps a lid on how much overall price levels can rise by, i.e. inflation. Meanwhile, with record global debt, it has been the Fed's imperative to boost inflation at any cost 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 2.7%, according to the latest Case Shiller data, 18 of 20 metro areas in the US saw home prices grow at a higher pace, while 16 of 20 major U.S. cities experienced home price growth of 5.4% 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 becomes wider, homes become increasingly unaffordable for most Americans.

Confirming the recent jump in home prices, at the national level in February home prices for the Top 20 metro areas soared 6.8% YoY according to Case Shiller, the fastest rate since June 2014...

... and hitting a new all time high nationwide.

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 confirms that something very troubling is taking place in San Francisco, which has either become "Vancouver South" when it comes to Chinese hot money laundering, or the second housing bubble has finally arrived on the West Coast. And while according to Case-Shiller data, home prices in San Francisco rose "only" 10.1% Y/Y, a more accurate breakdown of San Fran housing prices from Paragon Real Estate indicates a record 24% annual increase in San Francisco home prices, which increased by $110,000 in just the past quarter.

Behold: a housing bubble...

... but deals are still to be had.

Also worth keeping an eye on: price appreciation in Sin City has quietly surged in recent months, and in February home prices jumped 11.6% Y/Y, the highest annual increase in years. Considering 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 for a broader confirmation of the second housing bubble, than just the microcosm that is San Francisco.

* * *

Meanwhile, for those looking to buy for the first time, conditions have never been worse. Growth in property values is outpacing wage gains and limiting affordability, representing a major headwind for first-time buyers, and the broader 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.


JRobby cheech_wizard Tue, 04/24/2018 - 11:47 Permalink

"Bring back subprime! Keep inflating the fucker! Screw the deductibility issue! That can't stop irrationality! Put everyone in a house!"

"Um, aren't you seeing all of the building of apartments that rent for $1,300 to $1,700 sponsored by hedge funds, PE and non-bank entities that is going on?"

"That's for the one's we broke 10 years ago, their spirits are crushed! Now they pay rent that's as much as a mortgage! Can't you see the genius if it!!!

We have a brand new crop of fool sheep to build up and crush! We will do it every 10 years like clockwork until they are all in flimsy crap apartments (with granite counter tops!) their spirits crushed, addicted to 6 different prescriptions plus booze! Ha, ha, ha, ha"

In reply to by cheech_wizard

nope-1004 Four Star Tue, 04/24/2018 - 15:04 Permalink

SF is 49 sq. miles of landlocked turf with no place to build

The classic "no land" argument made by inexperienced speculators and sales shills - ie, realtors.

Ever hear of Japan in the mid '90's?  Ya.... look it up.  Fantastic real estate opportunity there cuz it was "an island with limited land".

Hope you don't do what other realtors do and give financial advice.



In reply to by Four Star

Kylescotch nope-1004 Tue, 04/24/2018 - 15:31 Permalink

Most of San Francisco is covered by 40' height limits.  It can take years to get permits and variances, plus millions of dollars, and along the way your NIMBY neighbours will be demanding you scale down until your building blocks no views and casts no shadows, while every affordable housing group will demand 100% affordable units and bargain down from there. Expect to pay them both off with donations/bribes.

In reply to by nope-1004

pods Skateboarder Tue, 04/24/2018 - 15:28 Permalink

If I ever ended up in So Cal, I would be on the lookout for Gandalf the Grey on a board.

"Yo Skateboarder!"

But, from what I hear, it might not even be you.

If they bring back dredging, I will have to invade Norcal before I die and get some nozzle time in the mecca for gold diggers (the real ones, not the other kind)


In reply to by Skateboarder

hedgemony rules pods Tue, 04/24/2018 - 17:29 Permalink

Sadly, I sincerely doubt nozzle time will ever again be available in the former Golden State through plying the depths of the auriferous streams and rivers with a gold dredge.  My rigs have collected only dust for 9 years.

Of course, the highly promoted and approved variation of nozzle time in this shit-hole of a state is that which abounds in San FranCrisco. 

In reply to by pods

Mr Poopra markar Tue, 04/24/2018 - 10:22 Permalink

It was the fastest to climb after the subprime crisis too.  The amount of foreign money pouring into that place is astonishing, but at the same time the Chinese invest like lemmings.  Soon as the smart money starts cashing out, many will follow suit.  I had many highly paid friends commuting 1-2 hour from work as they simply could not afford living any closer.  It's a strange place.

In reply to by markar

Beatscape cheech_wizard Tue, 04/24/2018 - 16:04 Permalink

I lived in San Francisco for 8 years.  I did love my time there, the weather is perfect, the women were gorgeous and smart and I was on top of my game working for 3-4 companies simultaneously.  I left around 2000 when the dot-com bubble was starting to burst and was recruited by an attractive job offer in Atlanta, where the cost of real estate was about 25% of the equivalent home in SF. 

I used to get kicks by hassling homeless MFs while they would try to scam unsuspecting tourists.  I used to see homeless shitheads brag about collecting several hundred a day while pretending to be penniless.  When I've returned on business trips, I'm appalled at the explosion of homeless assholes and derelicts in the city.  Plus, they are much more aggressive and disgusting now.  They have basically taken over Civic Center.  Given all the other options and better values for real estate, I would never live there again.  I like to visit, but wouldn't consider moving back unless I was in the billionaires club. 


In reply to by cheech_wizard

Endgame Napoleon markar Tue, 04/24/2018 - 11:01 Permalink

Wasn’t that due to another then-nascent mobile-tech revolution? Most of the jobs created by that mobile technology innovation centered in SV, rather than in Seattle—the site of the US “jobs boom” for the PC revolution.

Of course, the vast majority of jobs from the PC & mobile technology that was created in the USA, in part, due to lots of government money pumped into tech went to China, in addition to over two million potential SS contributions, just before the Boomer retirement. 

Most widespread job gains floated over to China, a country with a massive pool of rock-bottom-cheap labor. Because their population is so massive, it did not even make much of a dent in China, not from the looks of their deserted, pentagon-shaped mall, anyway.

The handful of Chinese nationals who cashed in on globalization park their fortunes in places like SV real estate....for the sake of their babies, of course, so we should not critique it, even if it drives housing out of the price range of most American citizens, causing much misery. 

This does not just impact the people whose lives are valuable in the USA: the citizens and noncitizens whose altruistic, self-sacrificing sexual intercourse led to reproduction—i.e. the chief market for houses.

It spills over into the apartment-renting market, creating a miserable situation where quality of life is stripped from millions of non-womb-productive citizens, living on one steam of earned-only income. 

I am talking about the non-womb-productive citizens with no access to spousal income, no access to child support that covers rent, no non-refundable favors from the progressive tax code and no layers of monthly welfare for sex and reproduction out of wedlock, including free or reduced-cost housing, free groceries, free monthly cash, free electricity and EITC refundable child tax credits up to $6,431, awarded to womb-productive citizens and noncitizens in single-earner households for working part time to stay under the earned-income limits for these programs. 

These glorified “working parents” are set up in “independent” apartments due to unearned income for womb productivity.

When people with secondary sources of income, like the couples with kids who would normally buy houses, crowd instead into apartments, there are too many people chasing apartment units, driving rent up to the moon—to the point where it consumes more than half of monthly, earned-only income for single, childless citizens who have only one stream of earned-only income, NOT median family income and not welfare-augmented income.

Low-income immigrant parents in single-earner households also chase apartment units, with their earned income buoyed by pay from the US government for sex and reproduction that increases per child produced on US soil, whether they enter the country legally or illegally and whether or not they pay taxes, albeit the illegal / legal immigrants who are paid up to $6,431 in EITC child tax credits from the US Treasury Department pay tax before it is all given back to them by government as pay for sexual intercourse and reproduction.

Meanwhile, half of all non-womb-productive, male citizens in this country — ages 18 to 34 — live with their parents in adulthood due to unaffordable RENT, as do many non-womb-productive, single female citizens————a large group of potential voters in this country, the USA, that was founded on the idea of individual liberty. Americans used to be concerned about the individual. Not today. This is now a country all about family clans, like many other countries around the globe. 

American politicians do not want the votes of individual citizens. They cater to illegal alien families on welfare and rich Chinese families, buying up inflated homes, much more than to us. 

In reply to by markar

Truth_Hoits markar Tue, 04/24/2018 - 12:16 Permalink

Ah, my dimensionally challenged little friend. They can build up... But your statement is a non sequitur... So let's just leave it at that for now.

The truth is, the last bubble in RE was due to market manipulation... It popped because they didn't have plunge protection at the time. Supposedly, now they do... As evidenced by the stock market. 

All fun and games while the market, any market, cooperates. And then it doesn't. The law of unintended consequences applies fold... Where equals manipulation.


In reply to by markar

hannah markar Tue, 04/24/2018 - 14:21 Permalink

markar you are a dumbfuck....half of san francisco housing has been empty for the last 70 years. whole blocks around chinatown are owned by foreign chinese...completely empty. they is shit tons of military areas that can be used.


the flippers are buying multi unit building and converting them to super expensive condos and no one lives in them. this isnt a land issue it is a greed issue. people dont make the salary to rent/buy the new luxury units.......

In reply to by markar

Kylescotch hannah Tue, 04/24/2018 - 15:46 Permalink

Wrong!  Every building in Chinatown is packed to the gills with Chinese people.  Some of the buildings are as old as the Gold Rush.  Picture 3 story brick buildings, three windows wide.  But the buildings go straight back to the end of the lot.  On every floor a central hallway with 25 doors on each side leading to 50 rooms just big enough for a bunkbed, maybe two.  In one building like this, you will easily find 300 people.  This is how people have lived in Chinatown for more than a century.  I have never seen housing density like this elsewhere in America.  Empty buildings, what a laugh.

In reply to by hannah

StreetObserver markar Tue, 04/24/2018 - 14:27 Permalink

Meanwhile Sanc-tuary Francisco and the entire Bay Area put out the welcome mat for illegals that now number well over 600,000. The illegals,plus amnestied and other recent arrivals from Latin America take up what's left of the low rent and lower income housing, pack five or six people into a space designed for one or two and pay commensurately higher rents, thus driving up all housing prices and destroying the ability of native born Americans to earn enough to pay the higher rents.


Ask a liberal whiner this question:

How can you be for housing the homeless, lowering rents for working people, saving the environment and still be for open borders?



In reply to by markar

Heros Mr Poopra Tue, 04/24/2018 - 12:17 Permalink

"And yes, it was the Joos."

The nazi jew not only hates "joos" when he has to live among them, but it is afraid to spell their identity correctly. You people are really fucked up in the head.  But we know that after recent discoveries about the massed nests of jew perverts in Hollywood and Washington.

In reply to by Mr Poopra

FireBrander Mr Poopra Tue, 04/24/2018 - 10:03 Permalink

Wait for it ............ Its the Jews fault, its the Christians fault.


50% of Realtors are Jews, the other 50% Christians! Kill all the Jews and Christians! Wait, that would leave me with Islam... Oh, wait a minute; shit!


Ok, ok, I'm back, lost it there for a moment.

In reply to by Mr Poopra