Tags: Income | Inequality | Housing Market | Wealth

Financial Times: Income Inequality Is Suppressing the Housing Market

By John Morgan   |   Wednesday, 13 Aug 2014 01:28 PM

The income gap between America’s richest and poorest metropolitan regions has reached its widest on record, and is fueling problems in the nation's housing market, the Financial Times reported.

If the problem remains unchecked, it could block continued growth of the economy, the newspaper concluded.

For instance, government data crunched by real estate site Trulia found the income gap between the 10th most expensive region (Boston) and the 90th (Cincinnati) by home prices in 2013 hit their biggest spread since records began in 1969. Trulia said Boston’s per capita income has grown to be 1.61 times higher than Cincinnati’s.

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Six of the 10 highest-income areas — including San Jose, Boston and New York — also achieved the strongest residential construction performance by permits in 2013, Trulia said.

“Housing markets are playing out at very different speeds partly as a result of the lack of geographical breadth in the labor market. Certain sectors of the economy are performing better than others, propelling some housing markets over others,” said Fannie Mae economist Mark Palim.

It means that while some areas are experiencing hyper growth in housing, others are struggling. In Austin, Texas, a jump in technology jobs has driven housing demand. But in Akron, Ohio, a manufacturing-dependent area, house purchases have been more muted.

Stanley Fischer, new deputy chairman of the Federal Reserve, noted in a speech that housing holds a key to U.S. recovery.

“The housing sector was at the epicenter of the U.S. financial crisis and recession and it continues to weigh on the recovery,” he said, noting that “residential construction [has been] held back by a large inventory of foreclosed and distressed properties and by tight credit conditions for construction loans and mortgages.”

Palim said job and income growth are integral to the housing recovery.

The Times reported, “The number of Americans in work has surpassed the pre-recession peak. But there has been little lower and middle wage growth, constraining demand for houses across much of the country. “

Fortune reported the American housing market is still mired in a multi-year slowdown.
Fortune said a Core Logic analysis estimated the number of underwater homes — those with a value lower than the mortgage debt the homeowners are saddled with — at 6.3 million, 12.7 percent of the homes in the U.S. with a mortgage.

“Now that home prices have more or less recovered to their pre-bubble peaks, it’s unlikely that we’ll continue to see the sort of price gains that we’ve become used to in recent years. That means that, just like with foreclosures, underwater homes will experience a very slow recovery,” Fortune reported.

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The income gap between America's richest and poorest metropolitan regions has reached its widest on record, and is fueling problems in the nation's housing market, the Financial Times reported.
Income, Inequality, Housing Market, Wealth
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2014-28-13
 

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