Wages aren’t keeping up with property value in Rice County. With the current trajectory of the housing market, we could see an increase in the homeless population, says Rice County Assessor Josh Schoen.
Over time, the average American’s wages have steadily increased. However, due to inflation, the American workforce has had the same purchasing power for the past half-century, according to the Pew Research Center.
Gas prices, for example, have been about as high as they are today when adjusted for inflation. In 1981, gas averaged $1.35 per gallon across the U.S., which would be $4.29 in today’s dollars, according to the U.S. Energy Information Administration.
The same can’t be said about the housing market. Especially in Rice County, which saw record growth 2022, according to Schoen. This unprecedented growth is happening at a higher rate than Rice County has ever seen, even before the burst of the 2007 housing bubble.
The median single-family home value in Faribault is at $207,100, up from $175,700 a year ago.
“The way last year went up really caught me off guard,” said Schoen. “I’ve just never seen anything like that. The regular sale was selling for $30,000 to $60,000 over the listing price, which was already high.”
Whether or not this indicates a flourishing housing market or an impending recession is up for debate.
Either way, the way the housing market works essentially guarantees that these increases are unsustainable and property values will eventually level out, according to Schoen. However, the speed at which these prices level out is the real kicker.
“It’s always rubbing the crystal ball, but most predictions are that it’ll come about more slowly than last time,” he said. “It’s not like it’s gonna happen this summer it’s gonna happen several years down the road. It’s kind of like the stock market. There’s ups and downs, but you hope that eventually it starts down here and goes up here.”
The problem with increased property value arises when wages don’t follow suit.
As Schoen points out, the standard is to spend about 25% of your wages on rent or a mortgage. As the cheaper homes becomes more expensive, especially for renters and first-time home buyers, this standard become impossible for many members of the working class, whose wages are not keeping up with inflation.
According to Faribault Chamber of Commerce President Nort Johnson, there are currently about 600 job vacancies in Faribault. He’s working with the county and local developers aiming to build more affordable workforce housing.
More houses are being built in Rice County but they have higher listing prices, due to supply shortages and higher building costs. Still, the county’s housing developments are slowly making their way back to pre-2008 levels.
These new housing developments are good for real-estate investors especially, but may not address the needs of the working class. As Schoen points out, new houses are not the solution.
“We’re starting to see a little bit of a pickup and we certainly need more [houses] right now,” he said. “But the price of a new home right now is just outrageous. You know, the supplies cost so much. There is a premium on new homes.”
Multiple projects aimed at helping address the housing shortage are being proposed, including a multifamily workforce housing project next to C&S Vending and houses to be reserved for lower-income first-time homebuyers near the future Rice County Public Safety Center.
Schoen is optimistic Rice County will be successful in addressing the affordable housing problem.
“I think (Rice County) is healthy and it’s growing,” he said. “It seems like all the factors are kind-of picking up. You know, there’s such a demand for lower-income housing, but the cost to build right now doesn’t make it a good investment. That’s why you’re seeing these developers working with the cities for TIF (tax increment financing) agreements and certain tax abatements.”