“The gulf between the housing haves and have-nots has widened considerably over the past two decades, as top-tier homes gained more value than less valuable, more entry-level homes and bottom tier homes in general lost more of their value during the housing bubble bust.”
So begins a sobering report on the widening gap between top-level and low-level housing markets by Zillow chief economist Svenja Gudell. Gudell writes that in 1996, the median top-third home was worth 2.75 times more than the median bottom-third home. That was about a $110,000 difference.
Twenty years on, that comparison is up to 3.2 times as much.
The gulf is at its widest in Detroit, where top-third homes are worth 127.3 percent more than bottom-third homes,” she writes. St. Louis (98.4 percent) and Atlanta (97.5 percent) were close behind.
“Not coincidentally, all three of those metros experienced high levels of foreclosure during the housing crisis,” she writes. “And foreclosures were far more prevalent among bottom-third homes, which were also likely to lose more value during the bust.”
These changes in tier-specific values, Gudell writes, mirror changes in incomes over roughly the same period. In 1999 the median top-tier salary was 5.8 times greater than the median bottom-tier salary. Today, that gap has widened to 6.6 times.
“The rate of change between wage growth for the highest earners and the lowest earners certainly drives growing inequality in the United States,” she writes. “But it is not the only contributor.”
Gudell says that the growing wealth gap is driven in no small part by changes in value of most people’s homes. A homeowner who bought a typical bottom-third home in 1996 would have seen its value increase by 70 percent by now.
“Not a bad investment, especially considering the wild up and down swings of the past ten years,” she writes.
But that increase is still less than that of a typical top-tier home bought in 1996. Today, that house is 99.4 percent more valuable. Combined, she writes, “these factors result in acute affordability concerns.”
Since the beginning of the century, the price differential between the uppermost and lowermost markets in metro areas in the united States has increased from 66 to 76 percent. Moreover, Gudell writes, “the percentage gap between the same ‘expensive’ bottom-tier home and ‘cheap’ top-tier home has widened in 23 of the top 35 largest metro areas analyzed.”