Do wage growth and home sales go hand in hand?

by MPA03 Dec 2014
The five metro areas that saw the strongest year-over-year home sales growth in October, also experienced median income increases from last year, according to Redfin economists. Orlando, Florida, which has strong investor home-buying activity, was the only exception. Meanwhile, the five places with the strongest declines in home sales experienced decreases in median income and increases in home prices.
 
While wage growth isn’t the only factor explaining the increase in these markets, a correlation does seem to exist, according to Redfin economists. Below are the five metros that experienced the largest sales increases this year:
 
1. Tampa, Florida
Home sales year-over-year: 19.7%
Percent change in median income: 1.1%

2. Orlando, Florida
Home sales year-over-year: 18.9%
Percent change in median income: -6.3%

3. Portland, Oregon
Home sales year-over-year: 13.7%
Percent change in median income: 1.6%

4. Raleigh-Durham, North Carolina
Home sales year-over-year: 13.3%
Percent change in median income: 0.7%

5. Boulder, Colorado
Home sales year-over-year: 12.9%
Percent change in median income: 5.7%

In the five places with the strongest declines in year-over-year home sale growth, median incomes dropped, or were essentially flat, when compared with last year, according to Redfin. In these markets, home prices also rose significantly since last year.
 
1. San Jose, California
Home sales year-over-year: -67.6%
Percent change in median income: 0.6%

2. San Francisco
Home sales year-over-year: -29%
Percent change in median income: -1.4%

3. San Diego
Home sales year-over-year: -12.2%
Percent change in median income: 0.6%

4. Las Vegas
Home sales year-over-year: -8%
Percent change in median income: -8.1%

5. Long Island, New York
Home sales year-over-year: -5.2%
Percent change in median income: -1.8%

Local economic conditions, especially the jobs market, are expected to play an increasingly important role in the housing recovery, according to Fannie Mae. It can be a virtuous cycle, as housing demand spurs construction—and more jobs.

In recent months the housing market has returned to contributing to economic growth, with home building alone responsible for 20% of GDP growth in the last six quarters, according to U.S. News World & Report.

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