Slowdown in Wage Growth may Slow Down Home Sales

Fitch Ratings reports while home prices continue to gradually climb nationwide, especially in the western U. S., it is due to low inventory resulting from slow construction rates of new homes. There are also many homes still mired in the foreclosure pipeline, according to “In markets with short supply, increased demand from institutional investors and individual borrowers returning to recovering markets has created the conditions for the sharp climb in prices,” said Stefan Hilts, a director at Fitch.

While gross domestic product (GDP) grew at an annualized rate of 4.2 percent, the strongest in nearly a decade, the unemployment numbers are falling because people are withdrawing from the workforce. As has learned, the economic base has declined in many traditional employment sectors, with median wages remaining depressed. Median household income is eight percent lower than in 1999, in real terms, compared to the fourth quarter 2013. “With median wage levels stagnant, many potential buyers do not have the resources necessary to participate in the home ownership market,” says Hilts.

(Image credit: Forbes)

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