Because homes are so expensive, income is an important way to
look at real estate markets. The disturbing fact is that average income - adjusted
for inflation - has remained almost the same
for the past 15 years, cycling between $29,000 and $31,000. This is the median
income, half of workers make more, half make less. If that’s how much money you
make, you can’t buy a home (unless, of course, there are two of you).
Another way to see income is through IRS data. 80 million tax
payers make less than $50,000 a year. 25 million make more than $100,000. And
30 million are in the middle. The 80 million mostly rent, the 25 million
already own a home. The 30 million are the swing vote - they may rent, they may
be first-time home buyers. Their economic future will have a lot to say about
real estate.
In November, total jobs were up 1.6 percent from last year. Jobs
were up 2.7 percent in business services, 2.2 percent in manufacturing, 2
percent in healthcare, 1.8 percent at restaurants, and 1.4 percent in finance.
Jobs in retail and government were essentially flat.
While the job situation remains adequate, home prices in some
large markets are leaping higher – so much higher that the danger of local real
estate bubbles is again with us. Who would have thought so just five years ago?
I don’t think either a recession or a real estate bust is at hand – yet. But a
soft landing for either the economy or real estate markets is always wishful
thinking. And bad news for one always makes the other worse.
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