New Jersey Home Prices Outpace Wage Growth
As the economic recovery continues, home price appreciation has outpaced wage growth in 76 percent of housing markets over the past two years by a 13-to-1 ratio. In New Jersey, the reverse is true.
Wage growth has outpaced home price appreciation, according to a new report by RealtyTrac.
"Generally, you would think that wages outpacing home price growth would be a good thing because it would indicate that there is more room for home prices to grow and I do think that is the case in New Jersey," said Daren Blomquist, vice president of Realty Trac. "But, one of the reasons that we're seeing wages outpacing home price growth is that home prices are not growing. We're actually seeing a slight decline in most of the New Jersey markets."
According to the report, home price appreciation outpaced wage growth in 140 of the 184 metro areas with a combined population of 176 million. Metropolitan statistical areas with the highest ratio of price appreciation to wage growth included: Merced, California; Memphis, Tennessee; Santa Cruz, California; Augusta, Georgia and Palm Bay-Melbourne-Titusville, Florida.
Meanwhile, wage growth outpaced home price appreciation in 44 of the 184 metro areas analyzed with a combined population of 51 million. Areas with the lowest ratio of home price appreciation to wage growth were Hagerstown-Martinsburg, Maryland,West Virginia, Wichita, Kansas, Des Moines, Iowa, Gulfport-Biloxi, Mississippi, and Harrisburg, Pennsylvania and New York.
"Home prices in many housing markets across the country found a floor in 2012 and since then have rapidly appreciated, particularly in markets attracting institutional investors, international buyers or some other flavor of cash buyer not constrained by income as much as traditional buyers," Blomquist said. "Eventually, those traditional buyers will need to play a bigger role in the housing market for the recovery to maintain its momentum."
In some New Jersey markets, closer to New York City, median prices average $365,000 which is on the higher end compared to the nationwide median price of $183,000.
"There may not be as much room for growth there, but in those markets, I think there is still potential for more growth because we have seen wages go up at a steady pace over the last two years, which means there are likely some pent up buyers out there who will be coming out of the woodwork in the near future to start purchasing some of these homes," Blomquist said.
Unlike the rest of the country, New Jersey is still dealing with a backlog of distressed foreclosure properties, which tend to drag home prices down.
"Those also tend to provide good opportunities to purchase a home, especially for first-time homebuyers who are looking for a bargain or a starter home. The distressed properties provide a good opportunity to get into the market and have instant equity in a home," Blomquist said.