Wage-home price gap could start closing, TRERC economist predicts

​​MONTGOMERY, Ala. – The gap between wages and housing prices grew during the pandemic, but Texas Real Estate Research Center Research Economist Dr. Adam Perdue predicts that will start to reverse this year.

“What we expected is a small drop (in prices) this ​year and just relatively flat for the next few years until everybody’s wages catch back up and adjust over time to a level that can sustain these prices,” Perdue told CNHI News. “Then we’ll see the normal price increase path after that.”

At the beginning of the pandemic, the Federal Reserve lowered interest rates to encourage spending. This flooded the housing market with buyers eager to take advantage of the low rates. However, the limited housing supply could not keep up with the sudden increase in demand, causing housing prices to go up.

“Housing prices have been going up faster than the price of everything else, in general,” Perdue said. “And then they have also been going up faster than wages.”​