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Stagnant Wages May Be to Blame for Weak Housing Market

Economy

Stagnant Wages May Be to Blame for Weak Housing Market

Family in front of newly purchased home

Family with sold home sign in front of their new home

The US housing market can be quite deceptive. There are a lot of homes that are selling for millions of dollars. In fact, you only need to look at the white-hot Manhattan, New York market to see how crazy home valuations have been getting recently. There are many reports of hundred million penthouses and multimillion dollar apartments. The valuations seem to be completely removed from the overall state of the US housing market.

Of course, a lot of this reflect the fact that, as a whole, the US economy is improving. There is a recovery; however, the recovery is quite uneven. There is a big income divide. The big surprise is that it’s not between the rich and the poor. The big divide is between the hyper rich and people who are simply rich, not to mention the rest of the population. Thanks to the Federal Reserve’s policy of active intervention in equities market, this wealth gap continues to grow. For the rest of America’s population, things are looking quite gloomy. Median household income in the United States is actually at the same level it was in 2007. The rank and file American is not making much headway as far as income growth is concerned.
This suggests one potentially huge reason why the American housing market, as a whole, hasn’t really made all that much progress. Sure, Chinese investors have been snapping up a lot of prime real estate properties and mortgage rates have been crashing but all of this hasn’t really moved the needle as far as restoring the overall health of the American housing market as a whole. One key reason for this is the purchasing power of the largest population base of the United States, which is the middle class, hasn’t really improved. Put simply, people can’t afford to participate in the housing market. Not surprisingly, while prices are inching higher, a large portion of the American population simply can’t afford housing in this market.

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