The US housing recovery is leaving behind low-income earners, as homes that were foreclosed boom in value.
Homes that were foreclosed during the housing crisis have gained almost twice as much value as other homes, according to a new Zillow analysis.
Since low-end homes were much more likely to be foreclosed, though, the original
owners of those homes have not benefited from that recovery. During the run-up to the housing bubble, many low-income earners bought homes, and the homeownership rate rose from about 65 per cent in the mid-1990s to almost 70 per cent in 2006. When home values crashed in 2007, millions of homeowners had to walk away – abandoning their initial investment and missing the opportunity to gain equity as home values recovered.
As a result, the rich-poor divide is growing in the US. In 2000, high-income households made an average of six times as much income as the lowest third of households. In 2015, the top third made nearly seven times as much as the lowest third.
Of all foreclosed homes, 46.7 percent were among the least expensive third of homes. Only 16.6 per cent were among the most expensive third.
Foreclosed homes gained value faster than other homes, and in many markets, are more valuable now than they’ve ever been. Since the lowest point in the housing bust, the average US home has risen 22 per cent in value, while the average foreclosed home has risen 39 per cent in value.
In many cases, investors bought foreclosed homes and converted them into rental properties, benefiting from the recovery as home values bounced back. The percentage of single-family homes being rented out has risen from 13 to 19 percent over the past decade.
“Income inequality is an important topic in the U.S. right now, because the gap between the richest and poorest Americans is growing,” says Zillow Chief Economist Dr. Svenja Gudell. “Many lower-income Americans lost their homes during the foreclosure crisis, forcing them to pay ever-increasing rents and locking them out of the benefits of the housing market recovery.”Google+