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Homeownership is the primary source of wealth creation among families and results in many economic and societal benefits.1 Housing wealth is mainly built by price appreciation gains. Over the past 30 years, single-family existing-home sales prices have increased at an annual pace of 4.3% as of 2021 Q4, with home prices accelerating at a faster annual pace of 8.3% over the past 10 years. Due to strong price growth, homeowners are reaping large wealth gains from homeownership. As of 2021 Q4, at the national level, a homeowner who purchased a typical single-family existing-home 10 years ago at the median sales price of $162,600 is likely to have accumulated $229,400 in housing wealth, of which 86% came from price appreciation.
This study looks at the distribution of housing wealth between 2010 and 2020 across income groups and in 917 metropolitan or micropolitan areas. For this study, NAR identified “middle-income” households as those with income of over 80% to 200% of the area median income. NAR identified rising middle-income class housing markets as markets that had the largest increase in the number of middle-class owner-occupied housing units in 2020 compared to 2010.
In dollar terms, housing wealth in 917 metropolitan or micropolitan metro areas rose to $24.1 trillion in 2020 from $15.9 trillion in 2010, an increase of $8.2 trillion, with 6.3 million more homeowner households reaping the wealth gains from homeownership.
Among 917 metropolitan/micropolitan areas, 529 areas, or 58%, had an increase in the number of middle-income households from 2010 to 2020. The top five rising middle-income housing markets with at least 50,000 more middle-income homeowner households were Phoenix-Mesa-Scottsdale (103,690), Austin-Round Rock (61,323), Nashville-Davidson-Murfreesboro-Franklin (55,252), Dallas-Fort Worth-Arlington (53,421), and Houston-The Woodlands-Sugarland (52,716).
The metro areas with a rising middle-income class of homeowners have achieved phenomenal wealth gains. Over a 10-year period as of 2021 Q4, the largest net price gains (as a percent of the purchase price) were in Phoenix-Mesa-Scottsdale (275.3%), Atlanta-Sandy Springs (274.7%), Las Vegas-Henderson-Paradise (251.7%), Cape Coral-Fort Myers (233.9%), and Riverside-San Bernardino-Ontario (207.6%). Price gains will vary depending on the property’s location and condition. REALTORS® can assist buyers and sellers in pricing the property t maximize the wealth accumulation and financial returns from homeownership.
Among areas that lost middle-income households, the largest declines of at least 20,000 households were in New York-Newark-New Jersey City (-100,214), Los Angeles-Long Beach-Anaheim (-73,839), Chicago-Naperville-Elgin (-34,420), Boston-Cambridge-Newton (-28,953), Detroit-Warren-Dearborn (-25,405), and Philadelphia-Camden-Wilmington (-22,129).
Unfortunately, as home prices have become less affordable, the distribution of housing wealth has worsened in the past decade, with low- and middle-income households sharing less of the housing wealth pie. Of the $8.2 trillion in housing wealth accumulated from 2010 through 2020, high-income homeowners accounted for $5.8 trillion, or 71% of the wealth accumulation. Among middle-income homeowners, total housing wealth increased by $2.1 trillion, or 26% of the housing wealth gains, with 980,000 additional middle-income homeowner households. Among low-income homeowners, housing wealth rose by $296 billion, or 4% of the housing wealth gain with 5.8 million fewer low-income homeowner households.
Low-income homeowners comprised a smaller fraction of all homeowners in 2020, at just 27.2%, down from 38.1% in 2010, with nearly 5.8 million fewer lower-income households that were homeowners from 2010 through 2020. There were 979,143 more middle-income homeowners over this decade, but they comprised a smaller fraction of homeowners in 2020, at 43%, from 45.5% in 2010. High-income homeowners made up a larger fraction, at 29.8%, from 16.4% in 2010, with 11.1 million more high-income households in 2020 compared to 2010.
Since the Great Recession, the homeownership rate has declined across all income groups, with the largest decline in the middle-income homeownership rate, falling from 78.1% to 69.7%. Smaller rates of decline in homeownership rates were observed for low-income households, at two percentage points, and high-income households, at four percentage points.
A more equitable distribution of housing wealth necessitates policies that will make housing more affordable for low- and middle-income households. These policies include 1) addressing the shortages in capital and lending for the development of affordable housing; 2) incentivizing shifts in local zoning to increase quantity of developable residential space; 3) promoting the conversion of unutilized commercial space; and 4) using federal resources to address rising construction costs and raw material and labor shortages.2
1 Source: Federal Reserve Board Survey of Consumer Finance, 2019. In 2019, the median value of any asset held by renter households was estimated at $3,100, or just 1.4% of the median value of primary residence held by homeowners estimated at $225,000. Even just among homeowners, the median value of a primary residence accounted for 57.1% of the median value of any asset held (financial or non-financial) by homeowners estimated at $393,800.
2 Source: Housing is Critical Infrastructure, National Association of REALTORS® commissioned study prepared by the Rosen Consulting Group; https://www.nar.realtor/advocacy/housing-is-critical-infrastructure