Chart of the Month: Wage Growth Eclipses Mortgage Rates for the First Time Since the 1970’s

Source: Federal Reserve Bank of St. Louis, Wall Street Journal, Bloomberg

Market Observations

While wage growth has been muted during the recent economic recovery, the financial burden of buying a new home just got a lot easier for those who can qualify for a loan. The latest employment report noted that wages for production and non-supervisory employees, which represent over 80% of the private workforce, rose 3.8% over the last twelve months. This is good news for prospective home buyers because the 30-year mortgage rate is currently at 3.7%, thanks to the Fed’s three 25-basis point rate cuts this year. Looking back through history, this is the first time since the 1970’s that wages have been above mortgage rates. While it remains to be seen whether rising wages and the lowest mortgage rates in nearly 50 years will reignite buying activity, particularly with house prices near all-time highs in many cities across the nation, the trend is a welcome development for lower wage earners and should be positive for the overall housing market.

Note: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice. Opinions expressed are those of the author, and do not necessarily represent the opinions of Cammack Retirement Group.

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