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Is Home Price Inequality a Good Thing?

With median-priced homes now getting too expensive for average households, tons of people are locked out of the market. Where is home price inequality the highest? LendingTree endeavored to answer that by analyzing house values in the 50 largest U.S. metros using a metric called the “GINI coefficient.” To provide a more tangible inequality measure, it included the values of the 5th and 95th percentile homes and their ratio, the company said.

Which market dominates the most unequal category? The Midwest, while the West reigns supreme in the most equal category for home prices, the analysis found.

The cities with the highest home price inequality: Detroit; Birmingham, Alabama; and Indianapolis, which posted an inequality level twice that of the most equal markets, the analysis indicated. On the flip side, Salt Lake City; Portland, Oregon; and Denver had the least home price inequality. Quantitatively, the analysis found that 95th percentile of home values were three times the value of the 5th percentile in these three areas, compared with more than ten times the value in the most unequal markets.

Believe it or not, high home prices don’t necessarily equate to high inequality, the study found. For example, the San Jose and San Francisco metros—with the highest values for the 95th percentile of homes ($2.7 million and $2.3 million, respectively)—ranked No. 41 and No. 33 for inequality.

Additionally, the metros with the most inequality tend to have very low prices for the 5th percentile of home values, the analysis reported. The most equal markets, however, were less affordable for borrowers with low incomes.

After diving deep into the discovery process, LendingTree reached a conclusion that defies conventional wisdom about affordability.

“Cities with more home value inequality have a wider distribution of home values, which means that families earning lower incomes may still have the opportunity to access homeownership in these cities,” it said. “The concurrent presence of high-value homes suggests that their economies are vibrant enough to support higher-earning jobs as well. Looked at in this manner, home value inequality could be beneficial.”

About Author: Alison Rich

Alison Rich has a long-time tenure in the writing and editing realm, touting an impressive body of work that has been featured in local and national consumer and trade publications spanning industries and audiences. She has worked for DS News and MReport magazines—both in print and online—since they launched.

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