Markets & Economy

The real reason home sales have softened

Blame stagnant wages, not dead cat bounce in home prices

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At the end of a strange week with lots of fresh data, two things stand out: Mortgage and long-term rates stayed low, and market movements were magnified by mass escape from wrong-side trades. On the surface, the U.S. data is strong. September payrolls jumped 248,000 jobs, plus another 69,000 revised up from prior months. But the whole purpose of a job is to make money. Average hourly earnings ... uh ... er ... fell one cent to $24.53, up just 2 percent year over year before inflation. The Fed’s job is to lean against too-rapid job growth, because in all modern economic cycles employers began to compete for employees by paying higher wages, ultimately producing inflation. The optimists are out of their minds today, cheering the health of the economy, but the income/unemployment disconnect is without precedent -- although it does connect to a different view of the world. Lou Barnes explains why slow wage growth can make renting look like a better deal than owning a home. ...