Bob Timm's "RealMan" Blog

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Minimum Wage and Home Ownership

Minot home sales

Minimum Wage and Home Ownership

 

What is doubling the minimum wage in some parts of the country going to do for home ownership? This is my prediction and only my opinion. I may be wrong and I may be spot on but the way I see it is this:

 

For a brief period of time the doubling of the minimum of the wage is going to be a boost to home ownership in those areas that the new wage is implemented. Following that brief period, I would say about a year, we will see a bust with many of those new home owners going into foreclosure. Here is why.

 

For many families with two wage earners the new found income will boost them to a level making them eligible for a home loan that has previously been just out of reach. Just like most every home buyer they will spend the maximum they can to get the most house they can, we all do it. I’m going to predict that most will make an honest go of it for 3 to 6 months… then the can of worms opens.

 

The can of worms is this: Time has proven, over and over, that when the minimum wage goes up everybody up the chain also asks for and usually receive an increase in their wages. Vendors will increase the prices of their products as the cost to produce their products or services has also gone up. Simple logic dictates that if your cost to produce a product just doubled you will no longer be able to produce that product without raising the price on it.

 

Products will cost more. Who does that (inflation) hurt the most? The lowest wage earners and those on a fixed income always suffer the most.

 

Add into this time proven fact is that companies cope in one of three ways.

1)      They close. Thus there will be more unemployment. More home foreclosures.

2)      They cut staff. Thus there will be more unemployment. More home foreclosures.

3)      They automate, eliminating human help. Thus there will be more unemployment. More home foreclosures.

 

The happy new home owners that got the loan because of the doubling of the minimum wage are likely to find themselves out of a job, with less buying power than ever, and in arrears on their house payments in just 6 months to a year.

 

This is just my prediction but time has proven this theory over and over again. I say look for the next housing bust in about a year from now… just in time for Christmas 2016.

Minot Real Estate

 

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Comment balloon 7 commentsBob "RealMan" Timm • November 11 2015 02:15PM

Comments

I agree to a point...Raising the wages that much will put some companies out of business and the people that bought will be scrambling

Posted by William Feela, Realtor, Whispering Pines Realty 651-674-5999 No. (WHISPERING PINES REALTY) almost 5 years ago

I hate to say it, Bob, but I am in agreement with your assessment. It's sort of like those people who win millions in a lottery and declare bankruptcy a few years later.

Posted by Nina Hollander, Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor (Coldwell Banker Realty) almost 5 years ago

Good morning Bob,

I do not see this segment being able to purchase a home and will result in higher unemployment before it is effect with like you say automation and small companies downsizing to afford the better help.

Make yourself a great day.

Posted by Raymond E. Camp, Licensed Real Estate Salesperson Greater Rochester (Howard Hanna Real Estate Services) almost 5 years ago

Hi Bob "RealMan" Timm ,  I think you may be spot on.  I remember buying my brand new Red 66 Mustang 2+2 fastback in 1967 for $2,500. Fast forward...The wages have gone up since then and so have the car prices to $30,000.  I bought my first home for $17,200 in 1972.  Now the same house is over $100,000.  I don't think incomes have gone up accordingly.

Posted by Larry Johnston, Broker,Friends & Neighbors Real Estate, Elkhart,IN (Broker, Friends & Neighbors Real Estate and Elkhart County Subdivisions, LLC) almost 5 years ago

Something needs to be done. When you look at five decades’ worth of wage data suggests that for most U.S. workers, real wages — that is, after inflation is taken into account — have been flat or even falling for decades.

So, adjusting for inflation, today’s average hourly wage has just about the same purchasing power as it did in 1979, following a long slide in the 1980s and early 1990s and bumpy, inconsistent growth since then. In fact, in real terms the average wage peaked more than 40 years ago.

 

Posted by Karl Hess, on The Jersey Shore (Keller Williams Shore Properties) over 4 years ago

I'm not sure I understand your comment: I've provided verifiable facts on wages in America and you've responded with an anecdotal, personal account of how to survive on minimum wage.

Annual GDP has grown from about 2.8 trillion in 1980 to approximately 19 trillion today (that's a 200% increase when adjusted for inflation) without any corresponding increase in wages for the poor or middle class. 

Again, something needs to be done; according to economists, raising the minimum wage will have a ripple affect on higher wage brackets. Of course, we need to be cognizant of any spike in inflation - but that hasn't happened in places like Seattle that has significantly increased the minimum wage.

So, what happens when business doesn't provide a livable wage to their workers? The taxpayer ends up paying the bill for their employees through subsidized housing, food stamps, etc, etc. And that's certainly not right.

Posted by Karl Hess, on The Jersey Shore (Keller Williams Shore Properties) over 4 years ago

There is so much misinformation concerning the minumum wage.

Who benefits from a higher minimum wage? (Courtesy of the Economic Policy Institute)

Posted by Karl Hess, on The Jersey Shore (Keller Williams Shore Properties) over 4 years ago

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