Home Prices Rise Faster Than Income, Inflation

A new Reuters poll suggests that the shortage of affordable housing is driving prices up at double the rate of both income and inflation.

According to CNBC, average earnings in the U.S. are expected to grow 2.8 percent in 2018, and inflation is expected to increase 2.5 percent. Meanwhile, house price rises have averaged more than 5 percent over the last few years, and are expected to hit 5.7 percent this year.

"We are not seeing a temporary phenomenon. House prices have been outrunning family incomes for several years in the U.S. and while demand has cooled off a bit, the supply side is still very tight," said Sal Guatieri, senior economist at BMO Financial Group. "I think house prices will continue to outrun family incomes for at least another year and it will take some time for demand to slow and to some extent supply to increase."

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