National Income

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses national income.

• Personal income for the country in 2013 rose modestly by 2.8 percent. The aggregate rental income increased much faster at 9 percent due to the combined effects of rises in rents and from more people renting.
• Wages and salaries are following the path of job creation.  So they rose as the economy added 2.2 million net new jobs in 2013.
• Farm income is beginning to soften following the huge surge in 2012.  Farm land prices therefore may be peaking.  Meanwhile, entrepreneurs’ income is showing a solid uptick.  It is a good early indicator of rising demand for retail, office, and other commercial spaces.  Income from unemployment checks are falling, and the reasons behind that are the cut-off to extended unemployment benefits and, more importantly, from job creations.
• Rents are likely to accelerate further in 2014. Aside from falling vacancy rates, some of the new tax levy on landowners will get steadily passed on to renters.  There is a new 3.8 percent tax levy on rental income, dividends, and other “non-labor passive” income for those in the high income tax bracket to partly fund the Affordable Care Act.  The logics of economics suggest that there will be tax shifting to consumers in the form of higher prices (rents) if the new supply cannot easily reach the market.  In the case of apartments and single-family rental homes, there is a great difficulty of obtaining construction loans to add new supply.  Moreover, the continuing difficulty in accessing mortgages to buy a home for moderate income households will keep many renters at their current status.