Is Wage Growth Matching Home-Price Increases?

Fleming: “Even though nominal prices are high today, on a purchasing power-adjusted basis, I believe that housing is as affordable as it’s been in a generation.”

IRVINE, CA—Wage growth is not matching home-price increases nationwide—but that doesn’t necessarily mean there’s a problem, First American Financial Corp.’s chief economist Mark Fleming tells GlobeSt.com. In a recent Real House Price Index report from the firm, Fleming said, “While a small uptick in rates in September caused an increase in real house prices compared to August, it is important to remember that mortgage rates remain at historically low levels. The low rates, combined with recent meaningful income gains, fueled an increase in consumer house-buying power, meaning affordability is at a quarter-century best. Even as interest rates increase above 4% post-election, housing, on a purchasing-power adjusted basis, will continue to be more affordable than it was in the early 1990s.”

We spoke with Fleming about wage growth and housing prices and how the two are expected to play out over the coming year.