Slow wage growth throughout this economic expansion has put a damper on the housing market as home prices have climbed much faster than wages. Nationally, only 48 percent of households can afford the median-priced new home. And that number shrinks much lower in many markets.
The lack of wage growth has perplexed many. With job growth having the longest stretch on record, experts have expected wage growth to follow. To date, that growth has been painfully slow.
But there are signs of hope when it comes to wages. The U.S. economy hit full employment in March 2017 and after a year and a half we have seen a shift. According to ADP, the payroll processor, wage growth hit 3.5 percent in the second half of 2018 after nearly a decade of minimal growth.
When it comes to individuals that switched jobs, there was a 5.5 percent increase in their wage, a full 1.5 percent higher than last year. This is relevant because job quits are close to their highest level on record and 25 percent of millennials voluntarily left their job in the past year.
As long as mortgage rates stay stable, the growth in wages should add to increased housing demand.