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Editorial Reflection



Fluctuating statistics about prices and wages should not blur inequality

 

A real neighborhood reflects community, which is a work of the Holy Spirit. It requires more than keeping up the fluctuating statistics of news cycles and poll findings.

A headline in a business section caught my eye recently: “Increase in prices of homes outstrips pay hikes.”  The article outlined how slow wage growth affects the real estate market, especially when housing prices rise. For some months now, business pages have been reporting that the housing market is recovering. Sales are going up. New home starts are increasing. It seems hopeful, even cheerful.

However, the cheerful picture has not extended to many middle class families looking for moderately priced homes.

Those who have been paying attention to the news have heard that the benefits of the economic recovery have been flowing overwhelmingly to those in the highest income bracket, and the corporations are sitting on record cash reserves instead of upgrading equipment and creating new jobs.

RealtyTrac, a housing data firm, has done a study of the relationship of wage growth and home prices. They used wage data from the Bureau of Labor Statistics and home price data from sales deeds in 184 Metropolitan Statistical Areas (SMA)—a city and outlying areas. They compared information from the second quarters of 2012 and 2014, when the median U.S. weekly wage increased 1.30 percent and the median home price increased 17.31 percent.

The company found that home price increases outstripped rising wages in 140 of the 184 markets that they studied—76 percent of the markets studied. The ratio of home price rise to wage growth was 13 to 1.

A significant portion of the potential market has been shut out of that market.

In 24 percent of the areas, wage growth kept pace with or exceeded home price rise.

A spokesman for RealtyTrac said buyers “not constrained by income as much as traditional buyers” were not being affected by the disconnect between wage growth and price growth. In other words, those with cash, whether individuals or companies, were able to be active in the market.

He expected the real estate market to begin showing effects of this spread. Where the spread is greatest there will probably be “plateauing home prices in 2015 until wages catch up.  Meanwhile, markets where wage growth has outpaced home price appreciation in the past two years are poised to see at least steady growth in home prices in 2015 in most cases.”

Another report comparing first quarters of 2014 and 2015, shows that home prices slowed and Oregon employers, with more jobs to fill, are paying more. 

Last year, 61 percent of available jobs paid less than $15/hour.  This year, a third of available jobs paid less than $15/hour and two-thirds are full time.

That progress seems positive, but data from each new study seems to shift reality.  We must continue to be alert to the consistent reality of ongoing inequality.

In Portland, where I now live, a phenomenon called “infilling” is becoming controversial. The process involves building new homes on previously unoccupied land or demolishing an older home and building a new one.  It’s a normal part of the evolution of livable neighborhoods, especially when attention is being paid to the neighborhood and the new house blends in.

The most interesting neighborhoods have developed gradually.  They fit together with a mixture of architectural styles and house sizes, and community develops.

However, what we are seeing is a reflection of the current market.  Large three-story houses, affordable only by those with ready access to cash, are replacing modest homes.  They are being built as close to the property line as possible.  Sometimes two tall skinny ones are built on a lot previously occupied by one smallish house, a garden, lawn, patio and play area. Other houses left on the block are dwarfed and shaded by the new building.

This speaks to our need for affordable housing and permanence, where neighborliness is retained and community is strong. 

Nancy Minard – contributing editor





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