Income Levels v. Home Prices

Economists often pay close attention to the ratio between how much local incomes have been rising and how much local real estate prices have been climbing. If real estate prices rise faster and farther than do local incomes, then it is a sure sign that local real estate is moving into a range in which it’s either difficult to afford or simply unaffordable.

Economists often pay close attention to the ratio between how much local incomes have been rising and how much local real estate prices have been climbing. If real estate prices rise faster and farther than do local incomes, then it is a sure sign that local real estate is moving into a range in which it’s either difficult to afford or simply unaffordable.

Often, economists will assert that the market will slow dramatically until one or both of two things happens: First, incomes must rise to a level that is more on a par with home price levels and/or second, home prices must stall or even fall to a level more on a par with income levels.

Life, however, is rarely this simple. We are looking, after all, at human psychology and the many unexpected factors that make up demand for homes. Consider the historical fact that every two new jobs created and filled in our area translate into the need for one new home. The number of jobs, in other words, can work in contrast to the income level of those jobs. Demand can grow even if income levels do not.

Thus, real estate markets often slow and heat up in unexpected ways, driven by factors beyond the hard numbers quoted by economists. Reading a real estate market is as much an art as a science, and truly adept real estate and mortgage professionals develop that art with care. For more information or assistance call Beth at 425-450-5208 and visit her website at www.bethbillington.com.