Wage Growth vs. Asset Prices: A Historical Perspective

Over the last 30 years, wage growth has significantly lagged behind the rise in asset prices, particularly in the housing market. In the 1980s, the average cost of a house in the U.S. was around three to four times the median household income. By 2022, this ratio had increased to nearly six times the median household income​ (Visual Capitalist)​​ (Pew Research Center)​.

Key Factors

  1. Home Price Surge: Between 2010 and 2022, home prices in the U.S. increased by 74%, while average wages only rose by 54% during the same period. This discrepancy is even more pronounced in certain regions. For instance, home prices in Nevada rose by 162% compared to a 47% increase in wages​ (USAFacts)​.
  2. Stagnant Real Wages: Despite nominal wage increases, real wages (adjusted for inflation) have barely budged since the late 1970s. For many workers, especially those in the lower income brackets, purchasing power has not improved significantly, contributing to a growing affordability crisis in housing​ (Pew Research Center)​.
  3. Economic Cycles: The real estate market is inherently cyclical, influenced by broader economic conditions such as interest rates, inflation, and job markets. In recent cycles, particularly post-2008 and during the pandemic, housing prices have surged due to low interest rates and high demand, further widening the gap between asset prices and wages​ (LongTermTrends)​​ (Visual Capitalist)​.

Impact on Affordability

The growing disparity between wages and asset prices has led to a situation where many Americans are unable to afford homes. High home prices relative to income mean that a larger portion of household budgets must be allocated to housing, leaving less for other expenses. This also stifles economic mobility, as people may be reluctant to move for better job opportunities due to high housing costs​ (USAFacts)​.

Forward-Thinking Strategies

For real estate brokerages, navigating this environment requires innovative approaches:

  • Promoting Affordable Housing: Advocate for and invest in affordable housing projects to cater to a broader segment of the market.
  • Leveraging Technology: Use data analytics to identify undervalued markets and help clients make informed decisions.
  • Adapting to Market Conditions: Provide flexible financing options and educate clients about the benefits of different mortgage products.
  • Sustainable Investments: Encourage investments in energy-efficient and sustainable properties, which can offer long-term cost savings and appeal to environmentally conscious buyers.

Building and Preserving Wealth with Purpose and Principle

At AARE Investment Management LLC, we are dedicated to providing client-centric, fee-based financial advisory services. Our approach is designed to align with your personal and financial goals, helping you build and preserve wealth through strategic planning and personalized investment solutions.

Ready to take control of your financial future? Contact AARE today to schedule a consultation and discover how we can help you achieve your wealth-building goals with purpose and principle.

schedule a meeting

Andrew Arroyo is a registered investment advisor and holds a Series 65 license (CRD #5748201) with Andrew Arroyo Investments, LLC (CRD# 152691) in the State of California.

Disclaimer:

The information provided in this podcast (“Real Cash Flow”) is for general informational purposes only and should not be considered financial advice. The content shared on this podcast, including any links or resources, is based on personal opinions and experiences and should not be relied upon as professional financial, tax, or legal advice. Before making any investment decisions, we strongly recommend that you consult with your own financial advisor, tax professional, or legal counsel. Every individual’s financial situation is unique, and you should seek advice tailored to your specific circumstances. The hosts, guests, and creators of this podcast are not responsible for any investment decisions made based on the information provided.

Legal Disclosure

© Andrew Arroyo Real Estate Inc. dba AARE

Legal Disclaimer for AARE Investment Trust and Syndications

An investment in Andrew Arroyo Real Estate, Inc., a Delaware corporation (“AARE”) involves risk. You should not invest any funds in this offering unless you can afford to lose your entire investment. In making an investment decision, investors must rely on their own examination of AARE and the terms of the offering, including the merits and risks involved. These securities have not been recommended or approved by any federal or state securities commission or regulatory authority. AARE is subject to the same risks that all companies in its business, and all companies in the economy, are exposed to. These include risks relating to economic downturn, political and economic events and technological developments (such as hacking and the ability to prevent hacking). Additionally, early-stage companies are inherently more risky than developed companies. You should consider general risks as well as specific risks when deciding to invest. An investment in any of the real estate funds or syndications managed by AARE Investment Management, LLC, a Delaware LLC, and/or Andrew Arroyo Investments, LLC, a Registered Investment Advisor, and/or Andrew Arroyo Real Estate, Inc., a Delaware corporation, (collectively, “AARE”) involves risk. When offering Regulation D offerings, the offer and issuance of the Securities to the Subscriber is being made pursuant to the exemption from the registration provisions of the 1933 Act afforded by Section 4(2) or Section 4(6) of the 1933 Act and/or Rule 506 of Regulation D promulgated thereunder. When offering Regulation A offerings, AARE is “testing the waters” under the Securities Act of 1933, to gauge market demand from potential investors for an Offering under Tier II of Regulation A. This process allows companies to determine whether there may be interest in an eventual offering of its securities. AARE is not under any obligation to make an offering under Regulation A. No money or other consideration is being solicited, and if sent in response, it will not be accepted. No sales of securities will be made or commitment to purchase accepted until qualification of the offering statement by the Securities and Exchange Commission (the “Commission”) and approval of any other required government or regulatory agency. An indication of interest made by a prospective investor is non-binding and involves no obligation or commitment of any kind. No offer to buy securities can be accepted and no part of the purchase price can be received without an Offering Statement that has been qualified by the Commission. “Share” or “Stock” refers to common stock of AARE. This communication does not constitute a solicitation to purchase or an offer to sell securities. The information herein may contain forward-looking statements and information relating to, among other things, AARE’s business plan and strategy, and its industry. These forward-looking statements are based on the beliefs of, assumptions made by, and information currently available to AARE’s management. The words “estimate,” “project,” “believe,” “anticipate,” “intend,” “expect,” and similar expressions are intended to identify forward-looking statements. These statements reflect management’s current views with respect to future events and are subject to risks and uncertainties that could cause the company’s actual results to differ materially from those contained in the forward-looking statements. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. AARE does not undertake any obligation to revise or update these forward-looking statements to reflect events or circumstances after such date or to reflect the occurrence of unanticipated events.

Skip to content