Middle-income households have seen the sharpest drop in homeownership in a decade, from 78% in 2010 to 70% in 2020, according to a new report.
In the same decade, the rate for low-income households dropped from 49% to 47%, while the rate for high-income households dropped from 91% to 87%, according to a study by the National Association of Realtors.
The NAR defines “middle income” households as households with an income between 80% and 200% of the regional median income.
Both low- and middle-income homeowners lost ground, accounting for a smaller share of home ownership in 2020 compared to 2010. Meanwhile, a much larger proportion of high-income people became homeowners in the same decade.
Of homeowners, only 27% were low-income in 2020, compared to 38% in 2010. Middle income homeowners made up 43% of homeowners in 2020, up from 45% in 2010. Conversely, people with high incomes made up 30% of homeowners, up from 16% in 2010.
“The study found that those with higher incomes were the biggest beneficiaries during this decade,” Gay Cororaton, lead author of the report and director of housing and commercial research at NAR, told USA TODAY. “It was a decade after the Great Recession when many homes were foreclosed, and it took almost 10 years for the unemployment rate to recover from before the Great Recession.”
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The Growth in Housing Wealth for Emerging Middle Class Markets study examines the distribution of housing wealth between 2010 and 2020 by income group and in 917 metropolitan or micro-cities.
NAR defines emerging middle-class housing markets as those that saw the largest increase in the number of middle-class owner-occupied housing units in 2020 compared to 2010.
The story goes on
While housing wealth rose across all income groups, low- and middle-income households ended up with a smaller share of the increase. The study found that of the $8.2 trillion accumulated in the housing stock from 2010 to 2020, high-income homeowners took roughly 71% of all accumulated wealth.
Among middle-income homeowners, total housing wealth jumped $2.1 trillion, or a 26% increase in housing wealth, with almost 980,000 additional middle-income homeowner households. Among low-income homeowners, home wealth increased by $296 billion, or 4% of the increase in housing wealth.
“Home ownership continues to be a proven method of building long-term wealth,” says Lawrence Yun, chief economist at NAR. “The value of a home usually increases over time, so homeowners begin the process of creating wealth as soon as they make a down payment and move on to pay off their mortgage.”
From 2010 to 2020, 58% of metropolitan areas and neighborhoods received middle-income homeowners.
The top ten growing middle-income housing markets, with at least 50,000 middle-income homeowners, included:
Phoenix-Mesa-Scottsdale (103,690), Austin-Round Rock (61,323), Nashville-Davidson-Murfreesboro-Franklin (55,252), Dallas-Fort Worth Arlington (53,421), Houston-Woodlands-Sugarland ( 52,716), Atlanta-Sandy Springs-Roswell (48,819), Orlando-Kissimmee-Sanford (35,063), Portland-Vancouver-Hillsborough (34,373), Seattle-Tacoma-Bellevue (31,284) and Tampa Street. Petersburg-Clearwater (28,979).
Top 20 growing middle class housing markets
Middle-income households in these growing markets have seen significant price increases.
For example, as of Q4 2021, the largest price increases (as a percentage of purchase price) over the previous decade were in Phoenix-Mesa-Scottsdale (275%), Atlanta-Sandy Springs-Roswell (275%). , Las Vegas-Henderson-Paradise (252%), Cape Coral Fort Myers (234%) and Riverside-San Bernardino-Ontario (208%).
Growing middle-class markets and housing wealth
Nationally, a homeowner who bought a typical single-family home 10 years ago for an average selling price of $162,600 probably has $229,400 saved up in housing. Of these wealth gains, 86% can be attributed to rising prices, the study says, with the median selling price of an existing single-family home rising at an annualized rate of 8.3% from Q4 2011 to Q4 2021.
Metropolitan markets that have seen declines in middle-income households over the past decade include New York-Newark-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).
Rising housing costs in metropolitan areas such as New York and Los Angeles over the past decade have made affordability a big issue for middle-income wage earners, keeping them out of the home buying process.
“Either middle-income people couldn’t afford to buy a house, or they migrated to other more affordable areas,” Cororaton says. “We definitely saw a lot of emigration in New York.”
Swapna Venugopal Ramaswami is USA TODAY’s housing and economics correspondent. Follow her on Twitter @SwapnaVenugopal
This article originally appeared in USA TODAY: These housing markets create wealth for the middle class.