Real Estate Outlook: Wealth Gap Related to Housing

04 grudnia, 2011

Housing has always been linked to wealth in one fashion or another, but now the latest indicators from the Pew Research Center show that housing has been one of the prime reasons for \"divergent wealth trends.\"

by Carla Hill

In other words, there is a growing wealth gap. For households aged 65 or older, this segment is 42 percent wealthier than the same-aged households in 1984. On the flip side, however, households headed by adults 35 or younger are 68 percent poorer than same-aged households in 1984.

According to the authors of this study, "Older Americans also have been the beneficiaries of good timing, in the form of the long run-up in home values that enabled them to accumulate wealth via home equity."

Many young households were hit hard by recent declines in home values, finding themselves upside down in loans, or losing any equity built over the last decade.

An ailing jobs market has kept many young would-be buyers from being able to enter the market. This has left us with much pent-up demand.

All can\'t be pinned on housing, however. Research shows that societal changes have also had an impact. Young adults today not only delay entry into the workforce (finishing higher levels of education), but also wait to marry later.

The Center reports, "Another change is that, compared with young adults in the past, today’s young adults are more likely to be minorities and more likely to be single parents. These characteristics have been linked with lower economic well-being. However, more young women are working than used to be the case, and many young women are postponing childbearing, with its associated costs."

Decreasing that wealth gap is a tall order in today\'s economy. The National Association of Realtors® is reporting that existing home prices for the third quarter of this year are down from a year ago.

Lawrence Yun, NAR chief economist, said the market is holding fairly even. “Home sales need to recover first – only then can prices stabilize. Existing-home sales are little changed from the second quarter but are notably higher than a year ago,” he said. “The good news is inventory levels have been trending gradually down.”

Nationally, the median existing single-family home is priced at $169,500. This is down nearly 5 percent from the $177,800 last year at this time. A large glut of distressed properties on the market is definitely affecting pricing. Non-distressed homes must compete with their pricing. According to the NAR, "Distressed homes, typically sold at a discount of about 20 percent, accounted for 30 percent of third quarter sales."

Regionally, the largest decline in sales was felt in the West, which fell 2.6 percent. The good news for this region, however, is that this rate is 16.7 percent higher than a year ago. The median existing single-family home price, however, didn\'t fare as well. It fell 9.0 percent in the third quarter to $205,700.

The Northeast had the second hardest quarter, with prices falling 6.5 percent to a median of $236,700.

The Midwest declined just 2.2 percent. It has the lowest median pricing in the country at $142,300. The South also only declined by 2.2 percent.

NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said home sales should be notably higher given the buying power in today’s market. “Housing affordability conditions have been at a record high this year, rents are rising and homes are selling for less than the cost of construction in most of the country,” he said.