Washington Trust Bank Weekly Economic Perspectives

Economic Perspectives - 09/27/24


featured
Perspectives
Last week's Perspectives section examined median income at the state level and then examined how much of the income is consumed by the median mortgage or rent payment. Today's Perspectives section drills down a little deeper and examines the same topic broken down by age groups within the states.

Soundbite

Last week's state data showed the challenges for many households in finding affordable shelter. This week's data shows that, the two age groups that are the most likely people seeking to buy a house or rent, have higher incomes than the macro state level. The result is that more states show affordable shelter when considering these two age groups. The situation is worse than the state level results for the youngest and oldest age groups. Unfortunately, as the table below shows, shelter is still unaffordable for the top ten Least Affordable states. The risk grows for the least affordable states as there are more choices for people in these two age brackets who are seeking affordable shelter. This could lead to loss of the prime working age population from the least affordable states to the more affordable states.

Observations

The data comes from the same Census Bureau survey used for last week. It is simply using a more detailed section of the survey.

  • 15-24 years old

  • 25-44 years old

  • 45-64-years old

  • 65 years and older

  • As you can see, the picture improves for the top ten Least Affordable states but still leaves them as unaffordable.


 

Median Mortgage as % of Median Income State Level

Median Mortgage as % of Median Income 25-44 Years Old

Median Mortgage as % of Median Income 45-64 Years Old

New York

77.3%

56.9%

53.2%

Hawaii

72.7%

53.3%

50.1%

California

68.8%

49.0%

45.5%

Washington

51.2%

39.1%

37.5%

Massachusetts

50.3%

35.1%

33.1%

Montana

48.4%

38.9%

37.7%

Oregon

47.9%

37.4%

35.1%

Idaho

46.9%

37.7%

32.5%

Colorado

46.5%

36.0%

32.3%

Utah

44.1%

35.4%

30.6%


Most Affordable-Mortgage Payments
  • The top ten Most Affordable states become more attractive when examining these two age groups.


 

Median Mortgage as a Percentage of Median Income State Level

Median Mortgage as a Percentage of Median Income 25-44 Years Old

Median Mortgage as a Percentage of Median Income 45-64 Years Old

Indiana

26.2%

20.7%

19.4%

Illinois

25.9%

18.9%

18.1%

North Dakota

25.2%

19.8%

19.6%

Ohio

24.8%

19.3%

18.1%

Kansas

24.6%

19.2%

17.1%

Kentucky

24.6%

18.9%

19.3%

Oklahoma

24.3%

19.5%

18.8%

Iowa

24.2%

18.1%

16.9%

Mississippi

23.9%

20.3%

18.8%

West Virginia

19.8%

16.5%

16.6%


Least Affordable-Rents
  • Three of the top 10 Least Affordable states become affordable for rent when examining the 25-44 year age group.

  • Half of the top ten Least Affordable states become affordable for the 45-64 year age group.


 

Rent as a Percentage of Median Income

State Level

Rent as a Percentage of Median Income

25-44 Years Old

Rent as a Percentage of Median Income

45-64 Years Old

New York

59.3%

40.8%

40.7%

Florida

47.2%

36.7%

34.4%

Massachusetts

46.0%

32.1%

30.3%

California

45.4%

32.3%

30.0%

Hawaii

41.3%

32.3%

28.5%

Georgia

40.3%

30.0%

26.8%

New Mexico

38.6%

30.4%

27.4%

Texas

36.8%

27.7%

24.8%

Maine

35.8%

27.6%

27.2%

Arizona

34.8%

27.5%

25.1%


Most Affordable-Rents
  • Just like the mortgage payment category, all of the top ten Most Affordable states become more affordable and more attractive.


 

Rent as a Percentage of Median Income State Level

Rent as a Percentage of Median Income

25-44 Years Old

Rent as a Percentage of Median Income

45-64 Years Old

South Dakota

25.8%

19.5%

17.0%

Nebraska

24.6%

18.3%

16.9%

Ohio

24.5%

19.1%

17.9%

Missouri

24.4%

18.6%

18.0%

Kansas

23.4%

18.2%

16.2%

Wyoming

23.4%

17.6%

16.4%

Wisconsin

22.6%

17.1%

16.0%

West Virginia

21.6%

18.2%

18.0%

Iowa

21.5%

16.1%

15.0%

North Dakota

16.0%

12.6%

12.5%



Median Income
  • 72% of states (36 states) have people between the ages of 15-24 who receive income of less than $50,000 while 82% of states (41 states) have people over the age of 65 earning $50,000-$74,999.

  • This compares to 84% states (42) have people between the ages of 25-44 who receive income over $75,000 and 86% of states (43) have people between the ages of 45-64 who receive income over $75,000.


0-Inccome-Median by Age.jpg

Mortgage Payments as a Percentage of Income by Age
  • Mortgage payments are unaffordable in all states for people between the age or 15-24.

  • That compares to 70% of states (35 states) that offer affordable mortgage payments for people between the age of 45-64 based on the 28% criteria.


0-Income-Median Mortgage Payment by Age.jpg

Rent as a Percentage of Income by Age
  • 90% of states (45 states) offer affordable rent for people between the age of 45-64 based on the 28% criteria, while only 5% of states (2 states) offer affordable rent for people between the age of 15-24.


0-Income-Median Rent by  Age.jpg

Closing Thoughts

  • When shelter affordability is examined by age group, we see the pattern of bifurcation that has been discussed with other economic data.
    • Shelter is more affordable for people between the age of 25-64 and is less affordable for the youngest (15-24 years old) and the oldest (65 and over).

  • It would be a mistake to think that the youngest and oldest age groups don't need shelter.

    • Not all of the youngest age group live with their parents.

    • The oldest age group still need shelter as well. 

      • In general, the US does not have the extended family structure that other countries may have so the youngest and oldest age groups cannot necessarily depend on their parents or grown kids to provide them shelter.

  • Examining the “prime working” age group (25-64 years old) shows that this group of people earn higher median income than the overall median income of a state.

    • This is logical since this age group is generally considered to be in their prime earning years for their jobs.

    • As a result, shelter is more affordable in more states for this age group.

  • Last week we learned that only six states (12%) met the 28% rule for qualifying for a mortgage using one income earner. 

    • Today's data shows that for the 25-44 year age bracket, twenty-eight states (56%) meet the 28% rule and thirty-five states (87.5%) meet the 28% rule for the 45-64 year age bracket.

  • Last week showed that nineteen states (38%) would meet the 28% rule for rent payments.

    • This week shows that forty-one states (82%) meet the 28% rule and forty-five (90%) meet it with the 45-64 year age bracket.

  • When considering these two age groups the overall affordability issue for shelter improves but does not go away. Unfortunately, for the oldest and youngest age groups, shelter affordability remains a key issue.

  • The least affordable states face the risk that the prime working age group (i.e., 25-64 years old) has more options when examining states that offer affordable shelter for them. 

    • Clearly, there are many factors that ultimately determine if someone is willing to relocate to another state, but affordable shelter is one factor supporting a move.

    • From an economic standpoint, the worst thing that could happen to a state is to lose its prime working age group population due to lack of affordable housing.

Economic Data


 

Time Period Reported

Current Result

Previous Result

Comments

9/23/24

 



 

Chicago Federal Reserve National Activity Index

August

0.12

-0.42

After two consecutive months of decline, the index rose into positive territory

S&P Global Purchasing Managers Index (PMI)

Sept

54.4

54.6

Slight slowing in activity in September compared to August.

  • Manufacturing PMI

September

47.0

47.9

Manufacturing activity fell further into negative territory.

  • Services PMI

September

55.4

55.7

Activity slowed but, remained positive.

9/24/24

 



 

FHFA Home Price Index Year-Over-Year Change

July

+4.5%

+5.1%

New home buyers continued to be frustrated by the increase in home prices.

S&P Case Schiller Home Price Index Year-Over-Year Change

July

+5.9%

+6.5%

The S&P Case Shiller index showed similar results to the FHFA index.

Consumer Confidence Index

September

98.7

105.6

Perhaps the consumer thinks the Federal Reserve knows something that they do not know.

Richmond Federal Reserve Manufacturing Index

September

-21

-19

This is the 11th consecutive month of declines.

9/25/24

 



 

MBA Mortgage Applications

9/230/24

+11.0%

+14.2%

The second consecutive week of surging applications was all due to refinancing activity.

  • Purchase Applications

9/20/24

+1.0%

+5.0%

Applications increased for a fourth consecutive week.

  • Refinance Applications

9/20/24

+20.0%

+24.0%

The drop in mortgage rates has triggered a wave of refinancing.

New Home Sales Monthly Change

August

-4.7%

+10.3%

Sales fell back after the strong surge in July.

9/26/24

 



 

Initial Jobless Claims

9/21/24

218,000

222,000

For those arguing that the labor market is weakening, it is not evident when examining people filing for unemployment insurance claims.

Continuing Jobless Claims

9/14/24

1,834,000

1,821,000

Continuing claims rose 13,000.

Real GDP (final revision)

2nd Quarter

+3.0%

+1.4%

No change from the previous revision.

Durable Goods Orders Monthly Change

August

0.0%

+9.9%

Transportation orders were the culprit.

  • Core Durable Goods Orders Monthly Change

August

+0.5%

-0.1%

Excluding transportation orders, core orders rose.

Pending Home Sales Monthly Change

August

+0.6%

-5.5%

All regions of the US rose except for a 4.6% decline in the Northeast.

9/27/24

 



 

PCE Price Index Year-Over-Year Change

August

+2.2%

+2.5%

Lower energy prices pushed the annual rate lower.

  • PCE Price Index Monthly Change

August

+0.1%

+0.2%

Goods inflation fell 0.2% while service inflation rose 0.2%.

Core PCI Price Index Year-Over-Year Change

August

+2.7%

+2.6%

Not the direction the Federal Reserve wants to see.

  • Core PCE Price Index Monthly Change

August

+0.1%

+0.2%

Service inflation rose 0.2$% while goods inflation rose less than 0.1%

Personal Income Year-Over-Year Change

August

+5.6%

+4.5%

Income growth finally outpaced spending growth.

Real Disposable Personal Income Year-Over-Year Change

August

+3.1%

+1.1%

Income growth was still strong after adjusting for inflation and taxes.

Personal Spending Year-Over-Year Change

August

+5.2%

+5.3%

Spending slowed on a nominal basis (before adjusting for inflation)

Real Personal Spending Year-Over-Year Change

August

2.9%

+2.7%

Spending was actually stronger after adjusting for inflation.

Trade Balance

August

-94.26 Billion

-$102.66 Billion

A reduction in the trade balance will increase GDP growth.

Retail Inventory Monthly Change

August

+0.4%

+0.5%

Retailers slowed their inventory growth slightly.

Wholesale Inventory Monthly Change

August

+0.2%

+0.2%

Wholesalers grew their inventory at the same pace as last month.

University of Michigan Consumer Sentiment Index

September

70.1

67.9

The increase was due entirely to a rise in optimism for future conditions.

  • Current Conditions Index

September

63.3

67.3

Consumers grew more pessimistic about their current conditions.

  • Future Expectations Index

September

74.4

72.1

Consumers became more optimistic about their outlook for the future.




Steve Scranton
About the author

Steve Scranton, CFA
Chief Economist

Steve is the Economist for Washington Trust Bank and holds a Chartered Financial Analyst® designation with over 40 years of economic and financial markets experience.
Throughout the Pacific Northwest, Steve is a well-known speaker on the economic conditions and the world financial markets. He also actively participates on committees within the bank to help design strategies and policies related to bank-owned investments.
 
As the Economist for Washington Trust Bank, Steve participates in public speaking engagements, as well as authoring multiple communications, to keep our clients informed of economic and financial market conditions.

Content Authenticity Statement:
The Economic Perspectives newsletter is comprised entirely of the expertise, thoughts, perspectives and opinions of the author with no use of generative AI. Data is sourced from the original providers (typically government agencies) and analyzed by the author.