Home Prices Are Rising Faster Than Wages: The States Where It's the Worst

Published: 10-25-23    Category: Insight

Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.

The outside of a home on a sunny day.

The US housing market is no stranger to volatility, and housing affordability continues to remain a significant concern for aspiring homeowners waiting on the sidelines as home prices rise and mortgage rates increase.

At the core of this concern, however, lies the crucial interplay between housing prices and wages that determines the financial well-being of families and individuals. To better understand this dynamic, we've analyzed data between 2018 and 2022 to examine how, in each state, housing prices have evolved compared to wages.

The results highlight disparities that reflect economic trends, regional influences, and the challenges many Americans face in finding affordable housing.

Understanding the Data

The data presented showcases the percentage increase in housing prices and wages across all 50 US states over a five-year period, from 2018 to 2022. This "Housing vs. Wages Growth Gap" quantifies how much more housing prices have grown compared to wages in each state.

National Outlook

Change in Housing Prices and Wages Since 2018

The data for the United States presents a sobering picture, as the nation faces a 15 percentage point gap between housing price and wage growth.

Over the last five years, housing prices have increased by an average of 37.2%, significantly outpacing wage growth of 22.2%.

Between 2018 and 2022, median wages only increased by $12,720. That's while national housing prices increased by a whopping $91,200, an absolute difference of $78,480.

This national trend signifies that, on average, housing affordability is a growing concern, as housing prices are rising much faster than wages. While some states exhibit extreme gaps, such as Idaho, the national outlook points to a pressing need for addressing housing affordability and wage growth at the national level.

Where Are Home Prices Rising Faster Than Wages?

Here are some more of our key findings on where home prices are rising faster than wages.

Western States Lead

Western states, including Idaho, Arizona, and Utah, feature prominently at the top of the list, emphasizing the region's rapid growth and housing demand.

Southern States Follow

Southern states, like Florida, Tennessee, and Georgia, also show substantial gaps, indicating economic vitality among housing affordability challenges.

Diverse Wage Growth

States with both high and low wage growth, such as New Hampshire and Delaware or Louisiana and Alaska, demonstrate that wage increases do not necessarily correlate with housing price growth.

Rank Geographic Area Name Housing Index - 5 year % Increase Wages - 5 year % Increase Housing Vs. Wages Growth Gap
-- USA 37.20% 22.2% 15.0%
1 Idaho 72.08% 26.5% 45.6%
2 Arizona 62.56% 24.8% 37.7%
3 Utah 59.92% 26.1% 33.8%
4 Florida 56.72% 27.3% 29.4%
5 Tennessee 50.19% 23.1% 27.1%
6 Nevada 50.44% 23.8% 26.6%
7 Montana 51.01% 25.6% 25.4%
8 Georgia 47.53% 22.7% 24.8%
9 Rhode Island 43.08% 20.0% 23.1%
10 North Carolina 47.33% 24.6% 22.8%
11 Texas 42.59% 20.5% 22.0%
12 Washington 47.76% 27.1% 20.7%
13 Oklahoma 35.87% 15.5% 20.3%
14 South Carolina 43.42% 24.2% 19.2%
15 Maine 46.89% 28.1% 18.8%
16 New Hampshire 45.78% 27.2% 18.5%
17 Wyoming 35.58% 17.2% 18.4%
18 Indiana 40.24% 22.0% 18.3%
19 Alabama 38.55% 20.9% 17.7%
20 Missouri 38.32% 20.7% 17.6%
21 Michigan 35.94% 18.7% 17.2%
22 New Mexico 39.47% 22.4% 17.1%
23 Ohio 37.38% 20.6% 16.8%
24 South Dakota 39.53% 23.7% 15.8%
25 New Jersey 35.24% 19.5% 15.7%
26 Colorado 41.27% 26.3% 15.0%
27 Delaware 34.29% 19.4% 14.9%
28 Kansas 35.38% 20.5% 14.8%
29 Kentucky 35.15% 20.5% 14.6%
30 California 37.93% 23.3% 14.6%
31 Oregon 39.53% 25.0% 14.5%
32 Vermont 38.97% 25.1% 13.9%
33 Wisconsin 34.82% 21.1% 13.7%
34 Connecticut 33.56% 19.9% 13.6%
35 Arkansas 36.14% 22.9% 13.2%
36 Nebraska 36.65% 23.8% 12.8%
37 Hawaii 33.13% 20.6% 12.5%
38 Pennsylvania 33.12% 20.9% 12.2%
39 Virginia 33.69% 22.1% 11.5%
40 Mississippi 30.81% 19.3% 11.5%
41 Minnesota 31.24% 20.2% 11.0%
42 Massachusetts 34.55% 23.7% 10.9%
43 West Virginia 24.38% 15.3% 9.1%
44 New York 31.65% 22.8% 8.8%
45 Maryland 29.02% 20.5% 8.6%
46 Alaska 24.91% 17.3% 7.6%
47 Iowa 27.30% 20.8% 6.5%
48 North Dakota 19.68% 15.0% 4.7%
49 Louisiana 22.02% 17.6% 4.4%
50 Illinois 24.94% 21.4% 3.6%

States With the Largest Housing vs. Wage Growth Gaps

Now, let's take a look at the states where the largest housing and wage growth gaps exist.

#1 – Idaho, a 45.6% Gap

Idaho leads the nation with the most significant housing vs. wage growth gap. Housing prices increased by an astonishing 72.08%, while wages only grew by 26.5%.

#2 – Arizona, a 37.7% Gap

Arizona follows closely behind, with housing prices growing by 62.56%, surpassing its 24.8% wage growth.

#3 – Utah, a 33.8% Gap

Utah ranks third, experiencing a 59.92% increase in housing prices compared to a 26.1% growth in wages.

#4 – Florida, a 29.4% Gap

Florida has seen housing prices rise by 56.72%, while wages increased by 27.3%.

#5 – Tennessee, a 27.1% Gap

Tennessee's housing prices increased by 50.19%, outpacing its 23.1% wage growth.

#6 – Nevada, a 26.6% Gap

Nevada's housing prices surged by 50.44%, while wages grew by 23.8%.

#7 – Montana, a 25.4% Gap

Montana's housing prices increased by 51.01%, with wages growing by 25.6%.

#8 – Georgia, a 24.8% Gap

Georgia exhibits a 47.53% increase in housing prices compared to a 22.7% increase in wages.

#9 – Rhode Island, a 23.1% Gap

Rhode Island's housing prices increased by 43.08%, while wages grew by 20.0%.

#10 – North Carolina, a 22.8% Gap

North Carolina rounds out the top ten, with housing prices growing by 47.33%, outpacing its 24.6% wage growth.

Real Dollar Increases of House Prices Versus Wages

Let's take it a step further and put these percentages into perspective: Observing the real dollar differences in home price and wage increases allows us to more tangibly understand the impact this gap has on housing affordability and wealth-building.

The table below illustrates the extent to which home prices have outpaced wage growth over time in dollar terms.

  • National Wage Increase: $12,720;
  • Housing Price Increase: $91,200; and
  • Housing Prices Outpace Wages by $78,480.
Wage Increase Vs. Housing Prices 2018-2022

Below is a state-by-state breakdown table, illustrating the disparity between wage growth and housing costs in actual dollars:

State Wage Increase Housing Price Increase Housing Prices Outpace Wages by
USA $12,720 $91,200 $78,480
Alabama $9,895 $53,000 $43,105
Alaska $9,648 $60,800 $51,152
Arizona $12,868 $161,700 $148,832
Arkansas $10,084 $46,700 $36,616
California $15,958 $169,100 $153,142
Colorado $15,491 $157,800 $142,309
Connecticut $13,495 $69,800 $56,305
Delaware $11,002 $81,900 $70,898
Florida $13,677 $123,500 $109,823
Georgia $12,150 $107,500 $95,350
Hawaii $10,506 $188,400 $177,894
Idaho $11,354 $199,400 $188,046
Illinois $12,815 $48,200 $35,385
Indiana $10,462 $61,400 $50,938
Iowa $9,866 $42,600 $32,734
Kansas $9,571 $47,200 $37,629
Kentucky $9,500 $48,200 $38,700
Louisiana $8,460 $41,900 $33,440
Maine $12,764 $93,100 $80,336
Maryland $12,516 $73,300 $60,784
Massachusetts $17,194 $134,000 $116,806
Michigan $10,078 $61,900 $51,822
Minnesota $11,717 $79,200 $67,483
Mississippi $7,665 $39,200 $31,535
Missouri $10,171 $58,600 $48,429
Montana $11,107 $117,200 $106,093
Nebraska $11,014 $70,600 $59,586
Nevada $11,929 $142,500 $130,571
New Hampshire $15,467 $114,700 $99,233
New Jersey $12,840 $84,900 $72,060
New Mexico $10,095 $68,400 $58,305
New York $16,652 $74,900 $58,248
North Carolina $12,462 $100,000 $87,538
North Dakota $7,859 $44,400 $36,541
Ohio $10,421 $53,000 $42,579
Oklahoma $7,265 $51,700 $44,435
Oregon $13,259 $133,800 $120,541
Pennsylvania $11,653 $59,500 $47,847
Rhode Island $10,763 $110,100 $99,337
South Carolina $10,822 $83,800 $72,978
South Dakota $10,361 $73,500 $63,139
Tennessee $11,653 $107,300 $95,647
Texas $11,867 $89,400 $77,533
Utah $12,660 $196,200 $183,540
Vermont $11,963 $71,600 $59,637
Virginia $12,895 $84,000 $71,105
Washington $17,891 $196,400 $178,509
West Virginia $7,039 $33,800 $26,761
Wisconsin $10,331 $64,300 $53,969
Wyoming $8,261 $61,800 $53,539

Notably, in many states, housing prices have seen substantial growth compared to wage increases. For instance, in California, housing prices outpace wages by a staggering $153,142 annually.

Conclusion

The analysis of housing price increases compared to wage growth from 2018 to 2022 reveals a complex economic landscape across the United States. It underscores the pressing issue of housing affordability in numerous states, with significant variations in the gap between housing prices and wage growth.

Disparities in housing affordability persist, and while some states have experienced remarkable growth in both housing prices and wages, others struggle with a widening gap between these two key factors.

The data serves as a reminder that the pursuit of affordable housing remains a critical issue for many Americans. Addressing the housing-wage growth gap is crucial for ensuring that residents can build wealth through homeownership, while maintaining a reasonable standard of living.

Methodology

We calculated the percentage difference over the 5-year period from 2018 to 2022. The resulting "Housing vs. Wages Growth Gap" was obtained by subtracting the percentage increase in wages from the percentage increase in housing prices. States were then ranked based on the magnitude of this gap.

Associated with the data, but not used in the final rank, was the dollar amount increase of wages and median housing costs over the same time period.

Housing Price data was collected from the Federal Housing Finance Agency's Annual House Price Indexes, while data for wage growth was collected from the Bureau of Labor Statistics. Median House Price data was collected from the Census Bureau American Communities Survey.

To calculate percentage increases in home prices, we chose to use the housing price index, rather than surveyed median home values, which were self-reported and can be influenced by market shifts. Conversely, house price index employs advanced statistical methods to provide a more reliable measure of price appreciation by considering factors like home type and characteristics. While we use median home price data for real dollar increases, we use the index for percentage changes. This will yield slightly different results than calculating home price change percentage using median values.

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