The Most Unequal Housing Markets

July 18, 2018

Home values can drastically differ in some areas of a metro and foster an environment of housing value inequality between rich and poor.

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LendingTree, an online loan marketplace, recently analyzed 50 of the largest metro areas to rank cities based on its home value Gini coefficient. The Gini coefficient ranges from 0 (complete equality where every value is the same) to 1 (complete inequality where one entity has 100 percent of the value and the others have none). 

“Inequality is the defining economic debate of our times,” says Tendayi Kapfidze, LendingTree’s chief economist and author of the report. “Since 1980, the majority of income growth in the United States has accrued to the top of the income scale, a trend that accelerated following the 2007-08 financial crisis. Home values have finally recovered from the most recent housing crisis to the extent that affordability is now a concern. In many large cities, the median-priced home is now out of reach of median-income households.”

Overall, researchers found the Midwest dominated the list of the most unequal markets, whereas the West tended to dominate the most equal. The biggest areas of disparity were found in Detroit; Birmingham, Ala.; and Indianapolis. The level of home price inequality is nearly double in these locales when compared to the most equal markets. On the other hand, Salt Lake City; Portland, Ore.; and Denver have the least home price inequality.

The metros with the highest inequality tended to have very low prices for the fifth percentile of home values. For instance, of the 10 most unequal markets, none had a fifth percentile home value of $100,000 or more (and averaged $48,500), according to the report. The most equal markets had a $242,100 average value for the fifth percentile of homes, according to the study.

Researchers also note that high home prices don’t necessarily equate with high inequality. For example, the San Jose and San Francisco metros may have some of the nation’s highest home values but they ranked 41st and 33rd, respectively, out of the 50 largest metros for inequality.

Kapfidze concluded that housing value inequality actually might be a good thing. “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 those cities,” Kapfidze says. “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.”

Where Home Price Inequality Is Highest,” LendingTree (July 17, 2018)