While a study released on Thursday by RealtyTrac shows a huge discrepancy between the growth in home prices and increasing wages, it appears that housing in most of the country remains affordable.  The California company looked at wage growth and home price appreciation over recent two year periods and found that the former is far from keeping up with the latter.

In its analysis RealtyTrac used data on median home prices taken from deeds registered in 184 metropolitan statistical areas in the two years that ended in December 2014 and Bureau of Labor Statistics wage data from the second quarter of 2012, when home prices hit bottom and began to recover, and the second quarter of 2014.  It adopted the six month time lag between the beginning of the two two-year time periods based on the hypothesis that a change in average wages would take at least six months to impact home prices.  

RealtyTrac found that home prices during the study period increased by 17 percent while median wages nationwide were up only 1.3 percent.  Thus the appreciation in housing values outstripped the growth in wages by a ratio of 13 to one.  Further, RealtyTrac found that a greater increase in home values compared to wages prevailed in over three-quarters (76 percent) of the housing markets.

Looking at averages, wages increased by 3.7 percent while housing values were up 13.4 percent.  The 184 metropolitan areas included in the study have a combined population of nearly 228 million. Data on national wages is based on median wages while MSA level data is based upon average wages.

Those areas where price appreciation was most out of sync with wages growth included Merced, California (141:1), Memphis, Tennessee (99:1), Santa Cruz, California (94:1), Augusta, Georgia (78:1), and Palm Bay-Melbourne-Titusville, Florida (62:1). 

Wage growth outpaced home price appreciation in 44 of the 184 metro areas (24 percent) with a combined population of 51 million. Metropolitan statistical areas with the lowest ratio of home price appreciation to wage growth were Hagerstown-Martinsburg, Maryland-West Virginia, Wichita, Kansas, Des Moines, Iowa, Gulfport-Biloxi, Mississippi, and Harrisburg, Pennsylvania.

Daren Blomquist, vice president at RealtyTrac said, "Home prices in many housing markets across the country found a floor in 2012 and since then have rapidly appreciated, particularly in markets attracting institutional investors, international buyers or some other flavor of cash buyer not constrained by income as much as traditional buyers. Eventually, however, those traditional buyers will need to play a bigger role in the housing market for the recovery to maintain its momentum.

"Those markets with the biggest disconnect between price growth and wage growth during the last two years are most likely to see plateauing home prices in 2015 until wages catch up," Blomquist continued. "Meanwhile, markets where wage growth has outpaced home price appreciation during the last two years are poised to see at least steady growth in home prices 2015 in most cases."

RealtyTrac said that despite the deviation between wages and home values most markets are still affordable by traditional standards.  Of the 184 markets 135 or 73 percent had a median home sales price in December that required less than 28 percent of median income for monthly mortgage payments, including property taxes and insurance.  Those markets have a combined population of 143 million.  The remaining 45 areas (32 percent) where more than 28 percent of the median income was required for housing have a combined population of 63 million and include traditionally unaffordable markets like Los Angeles, San Francisco, Seattle, Boston, and Denver.

Metropolitan statistical areas with the highest rate of home price appreciation during the two years ending in December were Detroit (+57 percent), Salinas, California (+49 percent), Myrtle Beach, South Carolina (+47 percent), Houma-Bayou Cane-Thibodaux, Louisiana (+45 percent), and Modesto, California (+44 percent).

Metropolitan statistical areas with the highest rate of wage growth in the two years ending in the second quarter of 2014 were Gulfport-Biloxi, Mississippi (+13.2 percent), Naples-Marco Island, Florida (+9.2 percent), Houma-Bayou Cane-Thibodaux, Louisiana (+8.9 percent), Manchester, New Hampshire (+8.4 percent), and San Jose, California (+8.3 percent).