This New Law Could Push Prices Even Higher

Puget Sound Real Estate:  This New Law Could Push Prices Even Higher 

For all of you who dig into the ADP and BLS employment reports every month, this is going to be old news for you.  However, for those of you that have lives and DON’T dig into the details of employment reports, this might surprise you.  According to ADP (Yep, that ADP – the payroll processor), in March of 2024, people who stayed in their same job saw a year over year wage increase of 5.1%.  However, for people who changed jobs, their wages increased 10% year over year.  That’s right, people who changed jobs in the past 12 months saw twice the wage growth as people who stayed put.  And this isn’t some crazy anomaly outta nowhere…  At its recent peak in June of 2022, job-changers saw year over year wage growth of 16.4%, compared to job-stayers who saw 7.7% year over year wage growth.  Basically, if you want to make more money, work hard, and apparently change jobs. 

It's this simple fact above – That job-changers see outsized pay increases versus job-stayers - that the recent FTC ruling banning non-compete agreements could have a profound effect on our Puget Sound Housing market.  Although not always enforced, non-compete agreements were absolutely an obstacle for workers looking to change jobs.  Exactly how many people that truly deterred from changing jobs?  I don’t know.  But with 30%, or about 18 million American workers currently bound by noncompete agreements, removing that obstacle will undoubtedly lubricate the labor markets.  And if job-changers are seeing higher wages than job-stayers, then it stands to reason that banning noncompete agreements could have more people moving jobs and therefore making more money, which would add upward pressure to housing prices here in the Puget Sound Housing Market. 

BUT WAIT!  Isn’t this inflationary, and therefore bad for rates?  On a macro level, yeah!  This is definitely inflationary which could cause mortgage interest rates to rise.  In fact, the FTC estimates that banning noncompete agreements could raise wages in the US by nearly $300 BILLION per year – which as we’ve seen, when people get paid, they spend… which leads to higher mortgage rates and decreased affordability.  But that income growth is not distributed evenly across the US.  Noncompete agreements are most prevalent in tech, sales, finance, and healthcare.  Which means the markets that stand to benefit the most from banning noncompete agreements are those that are heavily weighted in those industries; like Seattle.  So, though there may be some upward pressure on inflation nationwide, markets like Seattle who have an outsized presence in the most impacted industries will likely see local wages rise faster than any increase in mortgage interest rates – which will more than offset any affordability lost due to higher rates, resulting in upward pressure on PNW housing prices.   

Take it Home

There are already lawsuits against the new non-compete ban, so we’ll just have to wait and see if, when, and to what extent this ban is implemented.  But if this near total ban is passed, Puget Sound Homebuyers will have a much easier time moving jobs, getting paid, and increasing the price point at which they can afford a home. 

SOURCE: Kyle Bergquist