Bad news for anyone looking to dip their toes into real estate. According to a statement issued by the Mortgage Bankers Association (MBA), the cost of buying a home in the U.S. has far outpaced wage growth, and that phenomenon is making homes harder to afford.
According to a CNBC report, wages grew just 0.1 percent in February. The Economic Policy Institute also notes that the goal after the great recession was to increase wages by three to four percent a year. Instead, year-over-year, wages have only grown by 2.6 percent. The same report suggests that had wages increased as expected, the average hourly earnings would be $3.30 higher in the U.S.
This doesn’t bode well for Millennials who are already showing less interest in traditional housing practices. As young people approach first-time home-buying age, they don’t seem to be participating in the market at the same rate as their predecessors. This isn’t because they don’t want to buy homes at all; rather, it’s because the current housing market is more competitive than millennials can afford to be at this stage in their lives. Under the Trump administration, buying a home hasn’t gotten any easier: After Trump was elected, the average interest rate on a fixed 30-year mortgage went from 3.5 percent to as high as 4.3 percent.
“The major constraint in the market right now is the lack of supply,” said the MBA’s Mike Fratantoni on CNBC’s “Squawk Box”. “The absolute number of units on the market is near an all-time record low.”
Still, Fratantoni feels there is room for some optimism: “There’s just going to be this wave of housing demand hitting the economy over the next four to five years. And we think it’s going to bolster steady growth over that time period.”