Economists' Outlook

Housing stats and analysis from NAR's research experts.

Workforce Home Affordability as of April 2019

Employment conditions remain broadly positive as of April 2019, with 2.6 million jobs created from one year ago (May 2019 State Employment Monitor). Wages are broadly rising faster than inflation in all industries, except for manufacturing and transportation and warehousing. Employment is also shifting across industries, with an increasing fraction of jobs in health care, education, accommodation & food services, transportation and warehousing, and professional & technical services. What do these trends mean in terms of workforce home affordability?

Chart: Year-over-year Increase in Average Weekly Wage in April 2019
Chart: Annual Change in Employment in April 2019

Share of Mortgage Payment to Income by Industry

Using weekly wage (seasonalized) data released by the Bureau of Labor Statistics, I calculated the share of mortgage payment to income across broad industry categories for a single-worker household paying a 4.5% effective 30-year fixed mortgage rate on a 10 percent down payment mortgage for a $267,300 home (median price). A household who spends more than 30 percent of income on housing (mortgage, maintenance, utilities) is cost-burdened. Because I only calculated the mortgage payment, I compared the mortgage-to-income share with a lower threshold of 25 percent.

Table 1 below shows the mortgage-to-income shares for nonfarm workers. The calculations show that if a household has only one single earner working in the private sector, the household will likely spend 29 percent of income on a mortgage, which makes a home purchase unaffordable. Housing will be most unaffordable for single-earner households in the leisure & hospitality industry (66%), retail trade (47%), other services (31%), education & health services (31%), transportation & warehousing (29%), and manufacturing (25%). This means that other members of the household need to work or contribute to the mortgage payment (e.g., spouse, working adult children, relatives, room renters, etc.)  to make a home purchase more affordable. This may help explain the trend towards multi-generational housing where adult children continue to live with their parents, perhaps to both care for their parents and/or to help pay the mortgage.

Workers who are able to afford a home as a single-earner household will likely be those employed in the construction industry (23%, possibly the white-collar employees), professional and business services (23%), wholesale trade (23%), financial activities (21), information services (19%), mining and logging (18%), and utilities (16%).

Chart: Workforce Home Affordability by Industry as of April 2019

Job Trend Across Industries Since 2000

Table 2 shows that while workers in financial activities, information services, mining & logging and utilities earn wages that enable them to afford a home as a single-earner household, these industries now account for a smaller fraction of the workforce compared to their shares in 2000. On the other hand, employment in industries that don’t pay as well has been rising: educational services; arts, entertainment, and recreation; health care and social assistance; accommodation and food services, and transportation and warehousing.

Table: Non-farm Employment in 2000 vs 2019

The aging of the Baby Boomer population and the increasing use of technology are arguably the largest drivers of the shift in jobs across industries. Health care and social assistance jobs are increasingly in demand with the aging and retirement of Baby Boomers.  E-commerce, which now accounts for nine percent of retail sales from less than one percent in 2000, has increased the demand for workers in the transportation and warehousing and dealt a blow to the retail trade industry. While the shift in jobs from retail trade to transportation and warehousing is positive in terms of home affordability (retail trade workers earn 60 percent of the wage of transportation and trade workers), workers in the transportation and warehouse industry nonetheless face a home affordability challenge (see Table 1).

One positive trend is the rising share of professional and technical services jobs, driven by the use of technology in business, consumer spending, social interaction, and daily life (internet of things and use of voice-activated services like Alexa, Google). Professional and technical service workers accounted for 6.3 percent of the workforce in 2019, up from 5.1 percent in 2000, and they earn on average wages that will enable a single-earner household to afford a median -priced home (mortgage payment is 23 percent of income as show in Table 1).

State Employment Trend as of April 2019

Employment conditions remain broadly positive as of April 2019, boosting the demand for homes (among workers who can afford a home). In April 2019, net payroll employment increased by 2.6 million jobs from one year ago, an increase of 1.8 percent. Since December 2011, payroll employment has increased by at least 2 million annually. Compared to the level one year ago, nonfarm payroll employment increased in the District of Columbia and in all states led by Nevada (3.8%), Utah (3.2%), Arizona (2.8), Washington (2.7%), Texas (2.5%), Idaho (2.4%), South Dakota (2.4%), Florida (2.4%), West Virginia (2%), and South Carolina (1.9%).

View the May 2019 State Employment Monitor.

Map: Change in Non-farm Employment in April 2019 from One Year Ago