Home Prices Rising 2 Times Faster Than Wages

U.S. home prices climbed in March at the strongest rate in nearly three year as a dwindling supply of houses for sale is causing prices to significantly outpace income growth.

The Standard & Poor's CoreLogic Case-Shiller 20-city home price index released Tuesday rose 5.9 percent over the past 12 months ended in March, the most since July 2014. Home values are increasing at more than double the pace of average hourly earnings, making it more difficult for many people to afford to buy a home.

"Over the last year, analysts suggested that one factor pushing prices higher was the unusually low inventory of homes for sale," said David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices. "People are staying in their homes longer rather than selling and trading up.

A steady job market has bulked up demand among many would-be buyers, but there are fewer properties on the market. Sales listings have plummeted 9 percent over the past year to 1.93 million, according to the National Association of Realtors. The shortage of homes to buy has caused prices to rise sharply in many metro areas.

The largest annual gain was in Seattle, where prices have surged 12.3 percent. Portland, Oregon recorded a 9.2 percent increase, while Dallas prices rose 8.6 percent.

Of the 20 cities in the index, the weakest gain was in New York City-an area where home prices are already high relative to median incomes. Home prices in New York City have risen 4.1 percent in the past year, still much higher than U.S. average hourly earnings that have increased 2.5 percent over the past 12 months, according to the Bureau of Labor Statistics.

Bay Area Home Prices Hit Another Milestone Peak

The Bay Area’s notoriously high home prices jumped to yet another record in April, as sales plunged compared to the same month a year ago.

The median price for a previously owned single-family home in the nine-county Bay Area region climbed to $800,000 — an all-time high — and eclipsed the prior record of $752,000 set in June 2016, the CoreLogic real estate information service said Wednesday in its monthly report on the region’s housing market.

The steady march higher for Bay Area home prices has put them out of reach for many prospective buyers.

“It’s discouraging to see how expensive homes are,” said Robin Vecchio, a San Jose resident who has lived in the South Bay her entire life. “I’m being priced out of the Bay Area, but I don’t want to leave.”

The high prices also have left numerous would-be sellers unable to find new places to go in the Bay Area even if they could sell their houses for handsome prices, according to industry experts.

“Most people can’t afford to buy the house they are living in now,” said Doreen Roberts, a broker with Master Key Real Estate Mission, a residential realty brokerage in Fremont. “That is stifling the ambition of sellers to move and put their houses on the market. Unless they have another place they really have to be, they just hang on to the house that they have.”

Santa Clara, Alameda and San Mateo counties also posted all-time median highs in April, CoreLogic reported. Contra Costa County, which has typically been more affordable, was about 9.8 percent below its record level.

The price for the typical previously owned home was $1,050,500 in Santa Clara County, which is steadily holding above the $1 million level; $805,000 in Alameda County; $590,000 in Contra Costa County; and $1.4 million in San Mateo County.

Austin James, 22, a Brentwood resident, works in the real estate business and said he wants to buy a home in Contra Costa County — at some point. It’s a seller’s market right now, in his view, but he believes things could swing in favor of buyers by year’s end.

“It’s impossible for buyers to find anything right now,” James said. “But I don’t think things will stay this way. It might go a little farther, but soon the buyers will get smart and stop paying these high prices.”

Home sales plummeted throughout the Bay Area, falling 9.4 percent regionwide in April compared to the same month in 2016, CoreLogic reported.

“Fewer people are able to afford anything,” said Andrew LePage, a CoreLogic research analyst, who added that prices are a factor in April’s sales numbers.

CoreLogic reported that 4,990 single-family, previously owned homes were sold in April — the slowest April in nine years, LePage said.

Industry experts said the lack of supply is contributing to both fast-rising home prices and the feeble sales activity.

“There is a real lack of inventory right now, although there are signs that more houses are coming on the market,” said realtor Craig Gorman, a past president of the Santa Clara County Association of Realtors and the sales manager of the Intero Meridian office in San Jose. “The biggest challenge buyers are having is there are just not enough homes to choose from. Unfortunately, a lot of people have been priced out of the market.”

Nearly every home that does make it onto the market entices multiple buyers to battle for the right to buy the residence, Roberts said.

“For just about any house, there are at least two buyers interested, and typically we see at least between four and eight buyers,” Roberts said. “But if the house is in a really competitive price range, like an entry-level home, you can have 20 or 30 offers.”

Technology workers’ generous pay packages also can help stoke bidding wars.

“You have these tech companies that provide stock options, like Google, Apple, Facebook and so forth,” Gorman said. “For many homes, you have young millennials coming into the deal ready to pay cash for the house.”

That doesn’t mean prospective buyers who can’t get into the market today have entirely given up on the idea of owning a house.

“Eventually I’d like to buy,” said Austin, the Brentwood resident. “Maybe in a year or