Home Prices and Wages
As a follow-up to our recent 2014 yearend earnings call where we discussed the impacts of real wage and job growth on residential real estate values (a link to the call is located on Wilshire’s website at (www.Wilshirefp.com/Earnings-Webcast-2014), the following article provides further insight on why there may be a ceiling on residential property values in certain sectors as a result of the lag in wage and job growth. As addressed in our call, lenders like Wilshire are considering those factors when determining advance rates (or LTVs) against not only in-place rents but stabilized values which may be based on projected rent increases versus realignment of under-market rents. In addition, the wage/job market dynamic may impact investment decisions which are primarily based on the After Renovated Value (ARV) of a property versus the current market value, with investments in properties in locations which are historically resilient or showing increasing demand being one way to help mitigate potential down-side risk.
You can read the full article here: http://www.mortgagenewsdaily.com/03262015_realtytrac_home_affordability.asp