NAR: Metro Areas Experiencing Widening Inequality

Posted by Patrick Barnard on May 07, 2015 No Comments
Categories : Residential Mortgage

The rising home prices in a number of metro areas have allowed homeowners to build housing wealth in recent years, yet the continued decline in homeownership indicates that fewer people are obtaining these gains and that inequality in the U.S. market is worsening, according to recent research from the National Association of Realtors (NAR).

NAR's study reviewed data on homeownership rates, the changes in single-family median home prices, and measured the levels of wealth and income inequality between 2010 and 2013 to estimate the variation in 100 of the largest U.S. metropolitan statistical areas (MSAs).

The association's findings reveal that over 90% of the analyzed MSAs experienced declining homeownership rates at a time when home values have risen but incomes remained flat.

According to the study, the most unequal wealth distribution is found in MSAs with the lowest homeownership rates, including high-cost areas such as Los Angeles, New York and San Diego.

Lawrence Yun, chief economist for NAR, says, ‘Homeownership plays a pivotal role in the U.S. economy and has historically been one of the primary sources of wealth accumulation for middle-class families. Unfortunately, due to an underperforming labor market, insufficient housing supply and overly stringent underwriting standards since the recession, homeownership has plunged to a rate not seen in over two decades. As a result, the country has become more unequal, as the number of homeowners has fallen while the number of renters has significantly risen.’

NAR's study shows that 93 out of 100 analyzed markets experienced a declining homeownership rate from 2010 to 2013.

‘Changes in wealth during this period are especially profound in high-cost metro areas that have seen robust price growth,’ says Yun. ‘For instance, a typical homeowner in San Jose, Calif., enjoyed an increase of $210,671 in housing wealth while renters were left behind and likely exposed to annual rent increases.’

The study also analyzed the same metro areas against the Gini Index – a measure of inequality – to identify if both wealth and income inequality are intensifying in these MSAs.

According to NAR's data, 93 out of the 100 reviewed MSAs show a rising index, which signifies a growing inequality. The study found that Bridgeport-Stamford-Norwalk, Conn.; New York; Miami; and New Orleans currently have the most unequal distribution of income.

To read more about NAR's findings, click here.

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