Housing Prices Outpace Wages in Smaller Metros
Record-high housing prices are outpacing wage growth and forcing buyers to retreat in the midst of ongoing mortgage rate increases, according to The New York Times. The 10 cities that experienced the largest drop in affordability across the globe in 2021 were all located in the United States thanks to soaring property prices and stagnant income growth. The least affordable city out of 218 cities analyzed around the world was Cleveland, where the average price of a square foot of real estate rose by 134% over a five year period, while the average salary rose by just 37%.
Americans are relocating to smaller cities in record numbers, pushing regional prices to record highs in metros unequipped to handle fast growth, and financial hurdles caused by elevated inflation aren’t helping.
Americans are less likely to want to live in a city now than before the pandemic, according to a December 2021 report by the Pew Research Center. The increased demand in smaller cities has pushed up prices in some of those areas faster than wages have been able to respond.
In fact, Mr. [Pete] Mugleston said, the gap between average earnings and real estate prices in large American cities has fallen only slightly since 2017. “It was surprising to see how some of the larger, notoriously unaffordable cities, such as San Francisco and Los Angeles, have become more affordable over the past five years,” he said.