Economics 101 (Seattle: real estate market, to rent, credit)

[irrational exuberance]

Its been a while since I been on here but its seems like Economics 101 is prevailing in the real estate market. With wages flat since 1970 where is all the money coming from to keep up with the price of living? Credit and when that was extinguished last year what shall we ever do? I made a comment about 4 months ago or so about construction activity this summer being the lowest in atleast 20 years and low and behold what happened? I guess supply and demand work in every aspect of our economy and things wont turn around just because we will them to or we feel like they should.

[AzDreamer]

Do you have any links that support your claim that wages have been flat since 1970? Have you heard of the Boeing Bust that Seattle suffered from 1970 to 1985?

[irrational exuberance]

Az Dreamer, its called real wages ie nominal - inflation. Therefore if you get a 2% raise or we will say $500 raise but everything around you takes a cumulative effect of costing $510 dollars you really cant realize a wage increase because you are worse off before the raise than you were after the raise. You can google real wages over the last 40 years and there is plenty of charts to explain to you why if a pay raise that is equal or just above inflation has kept those real wages declining or flat for the last 38 years. I thought it was a common fact that wages have been flat for the last 38 years.

[Ira500]

There are more high paying high tech jobs here than there was 30 years ago, so that would explain some of the cause of the price increase of houses, but it's still way out of whack.
Historically, home prices here sell for something like 150 times the monthly rent for the equivalent house, and right now they are selling for something like 240 times the rent...Prices peaked here last July, and have declined something like 8% since then, while rents have risen, so either house prices will continue to drop, or rents will continue to rise, or both, or they'll both drop, but home prices much more steeply, but at some point we may revert to something close to the historical price to rent ratio.

[AzDreamer]

Originally Posted by irrational exuberance

I thought it was a common fact that wages have been flat for the last 38 years.

If it is a commonly known fact that wages have been flat for 38 years then you should be able to find a link confirming that.

According to the link below, between 1980 and 2000, the average wage for Washington State increased by 29.3 percent, after inflation adjustment. In King County the increase was 47.6%.

Average Wage (Maps) | OFM Washington Trends