A decade ago when the financial crisis was still a recent threat, the Federal Reserve embarked on a massive stimulus campaign to fortify and expand the housing market for millions of Americans. The objective was to facilitate low mortgage rates that would make buying a home affordable for everyone. Even though mortgage rates dropped to unimaginably low levels of below 4%, housing became unaffordable for many as housing prices accelerated.
Higher wages tend to garner higher housing prices, allowing workers to pay more for homes and mortgage payments. Yet the modest rise in wages over the past decade wasn’t the key driver of higher housing prices as it was primarily driven by lower mortgage rates.
The past decade saw the average home price, as measured by Freddie Mac, rise 50% from 2010 to 2019, while wages as measured by the Bureau of Labor Statistics rose 29% for the same period.
Sources: Freddie Mac, Bureau of Labor Statistics, Federal Reserve
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