From 2010 to 2020 it was a very good decade to be a homeowner, according to the National Association of Realtors Housing Wealth Gains for the Rising Middle-Class Markets report…(NAR)
- In total, from 2010-2020 housing wealth increased by $8.2 trillion
While housing wealth grew among all income groups, the top-tier did see the highest percentage of gains.
- High-income homeowners claimed 71% of the wealth gains or $5.8 trillion.
- Middle-income homeowners claimed 26% of the wealth gains or $2.1 trillion.
- Low-income homeowners claimed just 4% of the wealth gains or $296 billion.
Nationally, a homeowner who purchased a typical single-family at the median sales price of $162,600 ten years ago is likely to have accumulated $229,400 in housing wealth.
- The median single-family existing-home sales price rose at an annual pace of 8.3% from the fourth quarter of 2011 through the fourth quarter of 2021.
- The largest price gains over the preceding decade were in Phoenix-Mesa-Scottsdale which reported gains of 275.3% over the purchase prices. Followed by Atlanta-Sandy Springs (274.7%) and Las Vegas-Henderson-Paradise (251.7%).
Middle-income households were the main focus for the report and the results for this group were mixed…
- Nearly 980,000 middle-income households became homeowners between 2010-2020.
- However, the homeownership rate declined from 78.1% to 69.7% during the decade.
NOTE: Homeownership fell across the board with high-income homeownership falling four percentage points and low-income homeownership falling two percentage points.
As mentioned above, this report focused on homeownership of middle-income earners and the report’s conclusion seems to be that the middle-class is losing ground. I want to push back on this because this is a common misconception about the US economy that the middle class is being pushed out. Mark Perry had a great blog post over at Forbes three years ago that explained why the falling middle-class hypothesis is wrong…
- “America’s middle class did start largely disappearing in the 1970s, but it was because they were moving up to higher-income groups, not down into a lower-income category. And that movement was so significant that between 1967 and 2017, the share of American households earning incomes above $100,000 more than tripled, from 9% to 29.2%.”
What is interesting, is this report shows a similar pattern. Looking at total homeownership high-income households increased from 16.4% in 2010 to 29.8% in 2020. This was an increase of 11.1 million households. Now what is odd is that homeownership for high households actually fell as reported above by 4.0% during this same period. How is it possible that 11 million households were formed and yet the homeownership rate fell? Simple, more than 11 million new possible households were added to this category. I’m not trying to say that everyone who leaves the middle class did so because of upward mobility. No, there are people who are, unfortunately, falling out of the middle class and are becoming poorer. However, the data is clear on this, the vast majority of people leaving the middle class are getting richer and that should be celebrated.