Homeowners gain $8.2 trillion in housing wealth over 10 years

Nearly 980,000 middle-income households became homeowners from 2010-2020

From 2010 to 2020, middle-income households gained $2.1 trillion in housing wealth, according to a new study by the National Association of Realtors, released on Wednesday.

NAR’s Housing Wealth Gains for the Rising Middle-Class Markets study examined the distribution of housing wealth between 2010 and 2020 across income groups in 917 metropolitan and micropolitan areas.

The vast majority (71%) of the $8.2 trillion in housing wealth generated during this time period belonged to high-income households, while $296 billion, or 4%, was from low-income households.

During this 10-year period, nearly 980,000 middle-income households became homeowners and 529 of the 917 metro and micropolitan areas examined gained middle-income homeowners. NAR defined a middle-class homeowner as one earning an income of over 80% to 200% of the area median income.

The top 10 areas showing the largest increase in middle-class owner-occupied housing units in 2020 compared to 2010 were Phoenix-Mesa-Scottsdale (103,690), Austin-Round Rock (61,323), Nashville-Davidson-Murfreesboro-Franklin (55,252), Dallas-Fort Worth-Arlington (53,421), Houston-The Woodlands-Sugarland (52,716), Atlanta-Sandy Springs-Roswell (48,819), Orlando-Kissimmee-Sanford (35,063), Portland-Vancouver-Hillsboro (34,373), Seattle-Tacoma-Bellevue (31,284) and Tampa-St. Petersburg-Clearwater (28,979).

On the other side of the spectrum, 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), all saw a decrease in middle-income homeowner households over the past decade. Despite this decrease, some markets such as Los Angeles and New York, still saw housing wealth rise due to increasing home prices.

As of the fourth quarter of 2021, the largest price gains, as a percent of the purchase price over the last decade were in Phoenix-Mesa-Scottsdale (275.3%), Atlanta-Sandy Springs (274.7%), Las Vegas-Henderson-Paradise (251.7%), Cape Coral-Fort Myers (233.9%) and Riverside-San Bernardino-Ontario (207.6%).

“Middle-income households in these growing markets have seen phenomenal gains in price appreciation,” NAR chief economist Lawrence Yun said in a statement. “Given the rapid migration and robust job growth in these areas, I expect these markets to continue to see impressive price gains.”

Nationwide, 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, according to NAR, and as of Q4 2021, the median single-family existing-home sales price rose by at least 10% in 67% of 183 metro areas tracked by NAR. This means that a homeowner who purchased a typical single-family existing home 10 years ago at the median sales price of $162,600 is likely to have accumulated $229,400 in housing wealth, with 86% of the wealth gain attributed to price appreciation.

“Owning a home continues to be a proven method for building long-term wealth,” Yun said in a statement. “Home values generally grow over time, so homeowners begin the wealth-building process as soon as they make a down payment and move to pay down their mortgage.”

Although home prices fell roughly 30% during the Great Recession, home prices have grown at such a rate that a homeowner who purchased a home just five years ago would have accumulated $146,200 in housing wealth. As mortgage rates continue to remain low and housing inventory continues to decrease, NAR reported double-digit increases in the median single-family existing-home sales price in nearly two-thirds of the 183 metro areas it tracked.

While rising housing prices benefit homeowner, if prices rise too high they become unaffordable and low- and middle-income households cannot share in the wealth creation arising from homeownership.

“These escalating home values were no doubt beneficial to homeowners and home sellers,” Yun said in a statement. “However, as these markets flourish, middle-income wage earners face increasingly difficult affordability issues and are regrettably being priced out of the home-buying process.”

While the number of middle-income homeowners increased over the decade, they made up a smaller fraction of homeowners in 2020 at 43%, down from 45.5% in 2010. In 2020, just 27.7% of homeowners were low-income homeowners, down from 38.1% 10 years prior. Meanwhile, the share of high-income homeowners rose from 16.4% in 2010 to 29.8% in 2020.

According to NAR the homeownership rate across income groups has declined since the Great Recession. The largest drop was seen in the middle-income homeownership rate, which fell from 78.1% to 69.7%

The low-income and high-income homeownership rates fell two percentage points and four percentage points, respectively.

“Now, we must focus on increasing access to safe, affordable housing and ensuring that more people can begin to amass and pass on the gains from homeownership,” NAR president Leslie Rouda Smith said in a statement.

Start Your Loan with DDA today
Your local Mortgage Broker

Apply for a Loan

Mortgage Broker Largo
See our Reviews

See All Google Reviews

Looking for more details? Listen to our extended podcast!

< Older Post Newer Post >

Check out our other helpful videos to learn more about credit and residential mortgages.

Retiring at age 65 is no longer feasible, older investors say

By Didier Malagies • 22 Apr, 2024

Retirement at 65 has been a longstanding norm for U.S. workers, but older investors believe that not only is such an outcome unfeasible, but they’re likely to face more challenging retirements than their parents or grandparents. This is according to recently released survey results from Nationwide , with a respondent pool that included 518 financial advisers and professionals, as well as 2,346 investors ages 18 and older with investable assets of $10,000 or more. The survey follows other ongoing research into the baby boomer generation as it approaches “ Peak 65 .” The investors included a subset of 391 “pre-retirees“ between the ages of 55 and 65 who are not retired, along with subsets of 346 single women and 726 married women, Nationwide explained of its methodology. Seven in 10 of the pre-retiree investors said that the norm of retirement at age 65 “doesn’t apply to them,” while 67% of this cohort also believe that their own retirement challenges will outweigh those of preceding generations. Stress is changing the perceptions of retired life, especially for those who are closest to retirement, the results suggest. “Four in 10 (41%) pre-retirees said they would continue working in retirement to supplement their income out of necessity, and more than a quarter (27%) plan to live frugally to fund their retirement goals,” the results explained. “What’s more, pre-retirees say their plans to retire have changed over the last 12 months, with 22% expecting to retire later than planned.” Eric Henderson, president of Nationwide Annuity , said that previous generations who observed a “smooth transition” into retired life do not appear to be translating to the current generation making the same move. “Today’s investors are having a tougher time picturing that for themselves as they grapple with inflation and concerns about running out of money in retirement,” Henderson said in a statement. The result is that more pre-retirees are changing their spending habits and aiming to live more inexpensively. Forty-two percent of the surveyed pre-retiree cohort agreed with the idea that managing day-to-day expenses has grown more challenging due to rising costs of living, while 27% attributed inflation as the key reason they are saving less for retirement today. Fifty-seven percent of respondents said that inflation “poses the most immediate challenge to their retirement portfolio over the next 12 months,” while 41% said they were avoiding unnecessary expenses like vacations and leisure shopping. Confidence in the U.S. Social Security program has also fallen, the survey found. “Lack of confidence in the viability of Social Security upon retirement (38%) is a significant factor influencing pre-retirees to rethink or redefine their retirement planning strategies,” the results explained. “Over two-fifths (43%) are not counting on Social Security benefits as much as previously expected, and more than a quarter (27%) expect to receive less in benefits than previously anticipated.” The survey was conducted by The Harris Poll on behalf of Nationwide in January 2024.

Opportunities for First Time Home Buyers

By Didier Malagies • 22 Apr, 2024

Depending on where you live there is an opportunity in certain areas that you can get $2,500 towards the closing costs. You also get a lower rate and monthly PMI. Programs open up to you where there is down payment assistance and also the 1% down program available. I am seeing more and more first-time home buyers coming out now and this is information you need to know. Yes, home prices are higher and rates as well. But if you have these programs available and the payment is affordable then the probability of refinancing down the road is in your favor and if inflation continues to go up so will home prices. Maybe it is the right time to buy a home now? Tune in and learn https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329

The mortgage rate pendulum swings yet again

By Didier Malagies • 18 Apr, 2024

Expect 2024 to be mildly better than 2023 with mortgage rates falling in the second half of the year, housing experts opined in their forecasts at the end of the year. Cuts to the Federal funds rate (and subsequently to mortgage rates) are imminent, traders enthused after December’s meeting of the Federal Open Market Committee in which committee members predicted three rate cuts in 2024. Some experts forecasted as many as six rate cuts in the year based on this news. Rate cuts are still coming, just not in March , traders and market experts reasoned more recently as the economy continued to run hot. And now on the heels of reports of stronger than expected jobs growth and stickier than anticipated inflation , the market’s shift from optimism to pessimism over rate cuts is complete. Some even expect rate hikes before rate cuts. The pessimism is visible in mortgage rates. Freddie Mac‘s weekly Primary Mortgage Market Survey is climbing back towards 7%. HousingWire’s Mortgage Rate Center , which relies on data from Polly, is already above 7.2%. Rates were as low as 6.91% for Polly and 6.64% for Freddie as recently as February. On Tuesday, they reached 7.50% on Mortgage News Daily, a high for this year. Mortgage rates hold major power in the housing industry; most importantly, high rates exacerbate the current affordability crisis by walloping the buying power of would-be buyers and discouraging some would-be sellers – those with low, fixed-rate mortgages – from listing their homes, a drain on available inventories. All this leaves housing professionals once again fighting for their share of shrinking pies – as we have observed with recently released mortgage data and RealTrends Verified’s brokerage data , as well as deeper dives on the brokerage landscapes in Jacksonville and San Diego . It is unsurprising, then, that real estate stocks have suffered since the FOMC’s March meeting and the recent job and inflation reports. That includes the nation’s top homebuilders (DR Horton and Lennar), mortgage originators (United Wholesale Mortgage and Rocket Mortgage), brokerages (Anywhere and Compass) and residential search portals (Zillow and CoStar, which owns Homes.com). There are other dynamics at play for some of these companies, however. The brokerages are also contending with the rule changes included in a proposed settlement by the National Association of Realtors; some investors also believe those rule changes advantage CoStar at the expense of Zillow . UWM, meanwhile, is contending with a scathing investigative report by a hedge-fund-affiliated news organization whose hedge fund shorted UWM and went long on Rocket; it is also dealing with pending litigation . UWM denies the allegations made in the report. High mortgage rates, fewer mortgage applications and fewer home sales are unfortunately not the only effects housing professionals could see from a more prolonged high-rate environment. There are also spillover effects from other industries, especially office real estate. Regional banks – which traditionally have been major residential mortgage originators – went big on commercial real estate loans as larger banks scaled back in this area in recent years. That increased their exposure to downtown office towers, which have seen an exodus of tenants and a bottoming out of appraised values just as a record $2.2 trillion in commercial real estate debt comes due over the next few years. That ties up capital that could otherwise flow to residential mortgages and in some cases stresses banks like New York Community Bank, parent of Flagstar Bank — the 7th-largest bank originator of residential mortgages, 5th-largest sub-servicer of mortgage loans and the 2nd-largest mortgage warehouse lender in the country. Homebuilders, too, feel the effects of prolonged high rates. Although homebuilder confidence is still up significantly since last fall, new housing starts are slowing . The dim prospects for homebuyers have turned some investors to the nascent build-to-rent sector , essentially a bet that high rates are here to stay for long enough that would-be buyers are now would-be renters.