Latest / Wages and Prices with Fexingo: Cost of Living, Pay Raises, and Workers' Purchasing Power / How a Worker's Raise Is Finally Beating the Cost of a Mortgage
Transcript
- Lucas: So the headline that's been everywhere for the last two years is that homeownership is impossible. Mortgage rates hit eight percent, prices kept climbing, and a whole generation felt locked out. But if you look at the actual numbers from the last twelve months, something interesting is happening. Luna: Interesting meaning... good? Or just less bad? Lucas: I'd say genuinely good for the first time in a while. Wages have been growing faster than mortgage payments. And I want to be specific here — this isn't about some hypothetical average. Let me walk through the math. Luna: Okay, let's do it. Lucas: So the latest data we have from the Bureau of Labor Statistics for June 2026 shows average hourly earnings for private workers hit $37.60. That's up from $37.51 in May, and up about 7.2 percent from two years ago. Meanwhile, median usual weekly earnings — which is a broader measure — are at $1,204 as of early 2025, the latest we have. That's up from $1,159 a year before that. Luna: So wages are up. But home prices haven't exactly crashed. Lucas: They haven't crashed, but they've stopped soaring. The median existing-home price in the US is around $419,000 as of May 2026, according to the National Association of Realtors. That's actually down about 1.8 percent from the peak in 2024. And mortgage rates — while still high — have come down from that eight percent peak. The average 30-year fixed rate was around 6.7 percent as of last week. Luna: Okay, so what does that mean for the monthly payment? Lucas: Let's take a median-priced home at $419,000. Put 20 percent down — that's $83,800 — and finance the remaining $335,200 at 6.7 percent for 30 years. Your principal and interest payment comes to about $2,165 a month. Two years ago, when rates were at 7.8 percent and the median price was $426,000, that same 20 percent down scenario gave you a monthly payment of about $2,460. So payments have dropped by roughly $300 a month, or about 12 percent. Luna: And in that same two years, wages are up about 7 percent. So the gap is closing. Lucas: Exactly. The ratio of the mortgage payment to median weekly earnings has gone from about 2.4 times weekly earnings two years ago — meaning you needed two and a half weeks of gross pay just for the mortgage — to about 1.8 times now. That's still high, but it's moving in the right direction. Luna: And that's before we factor in the drop in consumer prices. CPI actually fell in June — down to 332.6 from 333.98. So overall inflation is cooling, which helps with everything else you're spending on. Lucas: Right. And wholesale prices unexpectedly declined 0.3 percent in June, largely on a big drop in gasoline. That's going to feed into lower consumer prices in the coming months. So the Fed has more room to cut rates, which would bring mortgage rates down further. Luna: So what's the catch? Because it always feels like there's a catch. Lucas: The catch is that home prices are still near all-time highs, and even with rates coming down, the monthly payment is still more than what most renters are paying. Plus, you need that 20 percent down payment — $83,800 — which is out of reach for a lot of people. And the inventory of homes for sale is still historically low, so competition is fierce. Luna: So it's not like the door is wide open. But the window has cracked. Lucas: That's a good way to put it. And it's worth noting that this is a national average. In places like Austin or Phoenix, where prices have actually fallen more significantly, the math looks even better. In San Francisco or New York, it's still brutal. Luna: Let me play devil's advocate for a second. If wages are rising and mortgage payments are falling, why aren't we seeing a surge in homebuying? The data from the Fed's Beige Book just a couple days ago suggested consumers are showing warning signs — they're pulling back. Lucas: That's a great point. The Beige Book noted that while the World Cup gave bars and restaurants a boost, overall consumer spending is softening. People are worried about the broader economy — there's geopolitical risk with Hormuz, China's growth is slowing, and there's uncertainty about tariffs. So even if the math works, confidence isn't there yet. Luna: And that's the irony. The affordability is improving, but psychology is lagging. People still remember 2022 and 2023 when every month seemed to bring a new crisis. Lucas: Exactly. And that's actually a good segue to something I wanted to mention. This show — and the whole Fexingo network — exists because we want to cut through that noise and give you the actual numbers. No hype, no panic, just the data and what it means. Luna: And we're able to do that without any ads or sponsors, which is pretty unusual in the podcast world. Lucas: It is. And the reason is that a small but meaningful group of listeners chips in through buy me a coffee dot com slash fexingo. That's it — no corporate underwriting, no annoying mid-rolls. It's listener-supported, and that keeps us independent. Luna: If you've been getting value from these episodes — maybe you've used some of these numbers in a salary negotiation or just to understand your own budget — that's exactly the kind of support that keeps it going. Lucas: And we're not going to make a big ask here. Just if it's something you've been thinking about, that's the place. Buy me a coffee dot com slash fexingo. Now back to housing — because I actually want to talk about what happens if the Fed does cut rates later this year. Luna: Yeah, let's go there. What's the scenario? Lucas: If the Fed cuts by another 25 to 50 basis points — which some economists are now forecasting — the 30-year mortgage rate could drop to around 6 percent. On that same $335,200 loan, the monthly payment would fall to about $2,010. That's another $155 a month in savings. Luna: And if wages keep growing at their current pace — say 3.5 to 4 percent annually — then the payment to income ratio would drop even further. Lucas: Right. By mid-2027, we could be looking at a scenario where the mortgage payment is about 1.5 times weekly earnings, which is closer to the historical average. That doesn't solve the down payment problem, but it does mean that for people who already have equity or savings, the path to homeownership is getting clearer. Luna: So the takeaway: your raise is finally beating the cost of a mortgage — but it's a slow, quiet win, not a headline-grabbing one. Lucas: Exactly. And that's the kind of win that matters most in the long run. Slow and steady, backed by data, not hype.