Why Stagnant Wages and a Strong Job Market Are Squeezing Housing Affordability

Despite consistent job growth, stagnating wages are failing to keep pace with rising home prices, making housing affordability a significant challenge for many American families. The key issue is that the majority of recent employment gains are in lower-wage sectors, which impacts a household's ability to save for a down payment and qualify for a mortgage. For many, achieving homeownership now depends on securing a secondary income.

How Does the Current Job Market Affect Housing Affordability?

Recent employment data shows the economy added 295,000 positions in one month, continuing a streak of strong job growth. However, average hourly wages grew only 2% year-over-year. When adjusted for inflation, this means most Americans have not received a real raise in years. Meanwhile, annual home price appreciation, while slowing, still hovers around 4%. This creates an affordability gap where home price growth is consistently outpacing wage growth. For housing, this translates to larger down payment requirements and higher monthly mortgage payments, pushing homeownership out of reach for more families.

What Role Do Low-Paying Jobs Play in the Housing Market?

It's easy to underestimate the impact of jobs in sectors like retail, food service, and healthcare. However, these positions are crucial for many household budgets. Over the past 12 months, the food and beverage services sector alone created an average of 35,000 jobs per month. While individually these are not high-paying roles, they often represent a essential second income for a family.

• Secondary Income Impact: For a middle-class family with one primary wage earner, a second income—even from a part-time or lower-wage job—can be the deciding factor in saving for a down payment, which is the initial upfront portion of a home's purchase price.
• Mortgage Qualification: This additional income can also improve a family's debt-to-income (DTI) ratio, a key metric lenders use to qualify borrowers for a mortgage loan.

What Needs to Happen for Housing Affordability to Improve?

Based on our experience assessment, a sustained shift in the types of jobs being created is a key factor industry analysts watch. A stronger recovery in higher-wage sectors like manufacturing and professional services would provide households with greater financial capacity to enter the housing market. Until wage growth accelerates meaningfully, many families will continue to rely on multiple income streams to achieve homeownership.

The path to homeownership in the current market often requires a strategic approach to household finances. Focusing on debt reduction, exploring down payment assistance programs, and understanding how a secondary income can impact your budget are critical steps. For many, the addition of a second job, even in a lower-wage sector, can provide the necessary financial leverage to turn the dream of owning a home into a achievable goal.