Homeownership has become much less affordable for Chicagoland consumers the last few years, according to a new analysis from RealtyTrac.
The Q2 2016 Home Affordability Index, which compares wage growth to home price increases, found that without exception, home prices in Chicagoland’s counties have risen far faster than wages, although homeownership does remain more affordable in Chicagoland than historical averages (due mainly to the rapid price declines during the Great Recession).
Here is chart breaking down RealtyTrac’s research:
|County||Q2 2016 Median Sales Price||Change in Median Sales Price, Since Bottoming||Change in Avg Weekly Wage, Since Bottoming||Pct of Avg Wages to Buy||Historic Pct of Wages to Buy|
The problem with slow wage growth
This is not the first time we have covered RealtyTrac’s Home Affordability Index, and for good reason – slow wage growth is at the center of numerous economic problems facing America, all of which conspire to limit homeownership’s growth.
Such problems include:
- Millennial wages have taken a particular hit since the downturn, and as a result, America’s largest generation has been largely on the sidelines when it comes to buying and selling homes – and there is little indication that will change.
- Inventory is low across the country, but the housing supply of lower-priced, affordable homes has fallen the most of all, which has only made the housing stock more expensive and more out of reach for many Americans.
- More than 60 percent of homebuyers utilize savings for their down payment, but according to a myriad of sources, an alarmingly high share of Americans have next to no savings. A Pew study, for instance, found that one in three families have no savings, while Google Consumer Survey found that 62 percent of Americans have, at most, less than $1,000 in savings.
- Finally, rents are rising rapidly – the majority of renters in most metro areas now devote a third of their income to housing costs – which only makes it more difficult to save for down payments and buy a home.
Homeownership does not operate within a bubble; like any other consumer purchase, it is privy to the wider economic trends of the time. And those trends, unfortunately, raise questions on where housing is heading.