Wages are failing to keep pace with rising house prices

Rising home prices are outpacing wage growth in cities around the world, putting a strain on countless would-be homeowners.

According to a new analysis of the global real estate market by Online Mortgage AdvisorA UK-based service that connects brokers and homebuyers, many cities were cheaper for local workers in 2021 than in 2017. And the 10 cities that experienced the biggest decline in accessibility were all in states United, with Cleveland leading the pack.

As part of its research, the company surveyed 218 cities around the world and compared the average price of a square foot of an apartment in each city center with the average annual salary of local workers. In Cleveland last year, the average worker could afford to purchase 289.7 square feet of space, a drop from the 496.3 square feet the average worker could afford in 2017.

“The US is seeing a trend to become much less affordable due to soaring property prices, while wage growth remains relatively flat,” Pete Mugleston, chief executive of Online Mortgage Advisor, said in an email. He noted that in Cleveland, for example, the average price of a square foot of real estate has risen 134% in five years, while the average salary has only increased by 37%.

Next on the list was Oklahoma City, which recorded a drop of 182.1 square feet, followed by Jacksonville, Florida, down 130.2 square feet; Boise, Idaho, down 125.8 square feet; and Las Vegas, down 96.8 square feet.

The list included five other medium-sized cities: Sacramento; Reno, Nevada; Louisville, Ky .; Tampa, Florida; and Raleigh, NC, but not major cities.

Americans are less likely to want to live in a city now than before the pandemic, according to a report from December 2021 from the Pew Research Center. Rising demand in smaller towns has caused prices to rise in some of these areas faster than wages have been able to respond.

Indeed, Mugleston said, the gap between average earnings and real estate prices in the big American Cities have declined only slightly since 2017. “It was surprising to see how some of the larger and notoriously inaccessible cities, such as San Francisco and Los Angeles, have become more affordable over the past five years,” he said.