Photo: Ron Cogswell/Flickr
The recent rise in home prices may have bolstered Americans’ net worth, but the perks have become increasingly concentrated in the hands of well-off homeowners.
A study released by the National Association of Realtors (NAR) on Thursday found that many major metro areas saw income inequality intensify from 2010, the year the housing market showed signs of recovery, and 2013.
During this time, home prices rose in 84 percent of the 100 largest metro areas, boosting the net worth – or the difference between families’ gross assets and their liabilities wealth – of many homeowners.
The association noted that over this period the national median inflation-adjusted family net worth rose only in the upper and middle income households (the top 40 percentile of income) compared to 2010.
Rising home prices also shut more people out of the housing market during this period. The association found that the homeownership rate declined in 93 percent of the metro areas studied. Rising real estate prices can increase family net worth for homeowners, but residents of big cities have become increasingly unable to get a toehold in the market.
NAR estimates the net worth of an average homeowner to rise to $223,200 in 2015, or roughly 40 times more than $5,500, the typical net worth of renters.
What’s more, rental prices also ticked upward. A study released by NAR in March found that among 70 major metro areas across the US, the typical rental price increase was 15 percent between 2009 and 2013. However, in the New York and Seattle metro areas, that percentage ballooned to 50.07 and 32.38 percent, respectively. Renter income also failed to keep up with living costs, increasing only 11 percent over the same period, nation-wide.
What does that mean for renters? Using Federal Reserve data, NAR noted a typical homeowner’s net worth in 2013 was 36 times greater than that of renters. That chasm is expected to grow in 2015 with the association estimating the net worth of an average homeowner to rise to $223,200, or roughly 40 times more than $5,500, the typical net worth of renters.
NAR said it’s hard to get an exact grasp of wealth inequality in metro areas. But homeownership provides some clues at the situation on a local level.
“A typical homeowner in Orlando gained $31,500 in housing wealth from 2010. However, the homeownership rate in Orlando declined by 4.3 percent. This means that fewer people received that housing wealth increase to their net worth. Therefore, it is easy to infer that Orlando has become more unequal as the number of homeowners has fallen,” NAR said in the report.
Another measure, the Gini Index, looks at income inequality by measuring the annual inflow of wages, interests, profits and other sources of earnings. The metro areas with the higher Gini Index, or the highest income inequality levels, also had low homeownership rates.
According to NAR, Los Angeles, New York, Fresno (CA), San Diego and San Francisco “can be inferred to have the most unequal wealth distribution as a result of their low homeownership rates.”
The report can be read in more detail here.