The economy is growing but continues to underperform. The first quarter GDP looks to be turning mildly negative once the data revisions are in. This sluggish production is occurring at a time when employment has been gaining at a solid pace. A net total of 3.1 million net new jobs were added to the economy in the past 12 months to March. However, the pace of job gains will no doubt slow because the cost of hiring workers is rising.

Wages are not rising that much, but due to the fall in labor productivity over the past two consecutive quarters (something that has not happened in over 20 years), unit labor costs has shot up. The cost of production for one hour of labor rose by 4 percent in the fourth quarter and by 5 percent in the first quarter. Such a trend portends scaling back in hiring decisions in the months ahead.

Though there was a one-time factor that partly explains for the rough first quarter, GDP growth for all of 2015 will still grow at 2 to 2.5 percent. Given the long-run historical average GDP growth rate of 3 percent, we should not be content. Moreover, this year’s growth of less than 3 percent would mark 10 straight years of underperformance. Growth is still a growth and not a recession and, hence, about 2 million net new jobs are likely to be added to the economy in 2015.

Jobs are the top determinant of housing market performance and Utah, Florida, and the states along the Pacific Ocean are leading the pack in jobs. No wonder then that these states are doing very well in either home sales or home prices. It is because the high demand can be met by increased supply and increased home sales or it can be met by higher home prices when supply is not rising. The dollar volume gains are, therefore, not necessarily coming from increased home sales but, as in the case of San Francisco and San Jose areas, from much higher home prices. The full list of state job performance is shown below. One caution in reading the state job report is that it represents a 12-month job gain. North Dakota appears to be cutting jobs in the past few months due to low oil prices, but given the hefty job gains many months earlier, it is still showing net job gains over the 12 months.

One interesting development of the recent housing market cycle is the huge disparity that is developing in regard to wealth distribution. Simply put: There are fewer homeowners and more renters at a time when home values are rising. And the home values appear to be re-accelerating again as the housing shortage continues. Median home prices had been rising at 4 percent in the middle of 2014 (year-over-year) before steadily rising to 5 percent, 6 percent, and in March to 7.5 percent. New-home construction is still depressed and that is holding back new, clean, empty homes from appearing on the market.  This fast rise in home values is unhealthy for the housing market in terms of hitting affordability, which will then steadily drag down home sales, and from rising wealth inequality.

From both a business and a societal point of view, we need to assure more qualified renters are able to convert into homeownership, and this can be helped from modest dialing-down on underwriting standards. Second, we cannot have more buyers with increasing housing supply. Homebuilding can be increased by relaxing some of the financial regulatory burden placed on small local community banks.

Lawrence Yun is the Chief Economist for the NATIONAL ASSOCIATION OF REALTORS®.