Here’s a striking figure: from 2012 to 2014, housing prices rose 13 times faster than wages.
That’s the word from a new study by RealtyTrac, which looked at 184 metro areas around the country. One hundred and forty of those metro areas — with a combined population of 176 million — saw housing outpace wages. And 45 of them — for a combined population of 63 million — saw median home prices spike past 28 percent of median income for monthly mortgage payments. That’s the threshold beyond which housing is traditionally considered unaffordable.
Overall, the study found that median wages went up 1.3 percent, while housing prices went up 17 percent over roughly the same time period.
This information opens a window on two things: why relative inequality is bad, and why inequality is likely occurring in the first place.
On the first point: Daren Blomquist, the vice-president at RealtyTrac and the author of the report, told Bloomberg Business that the housing recovery has “largely been driven over the last two years by buyers who are not as constrained by incomes — namely the institutional investors coming in and buying up properties as rentals, and international buyers coming in and buying, often with cash.” For regular homebuyers to get a foothold, “either wages are going to need to go up or prices are going to need to at least flatten out and wait for wages to catch up.”
One of the responses you often hear to concerns about inequality is that the purely relative gap between the bottom and the top doesn’t matter.
