Report: Wealth Gap Widens as Renting Becomes Norm
In recent months, there has been good news on the housing economy front. Specifically, housing prices are rising once again to levels that reflect their actual value, a sign of overall economic recovery and growth after the Great Recession.
But there is a downside to all this too.
That recession, one of the most devastating financial downturns in U.S. history, created a huge share of renters. Many are people who lost their homes to foreclosure or suffered some other consequence as a result of the housing market implosion.
A new report from CNBC indicates 90 percent of housing markets in metropolitan areas show a drop in rates of home ownership. Home values are on the increase, but incomes are flat. What’s worse, the wealth gap is widening.
Citing the latest research conducted by the National Association of Realtors, the report noted that historically, ownership of a home has been the biggest source of wealth accumulation for middle class families.
But as our foreclosure lawyers in Miami understand, there are now a number of significant barriers to this important financial milestone.
For starters, the labor market has been under-performing for some time. This was a problem even before the recession. The Pew Research Center, for example, recently analyzed five decades’ worth of government data and found that, once adjusted for inflation, pay rates have been flat or falling for decades. This has been true regardless of whether the economy was adding or subtracting jobs.
Of course, this doesn’t take into account the other ways workers are paid – i.e., retirement account contributions, education subsidies and health insurance. But salaries and wages make up the largest chunk of employee compensation. According to the Bureau of Labor Statistics, the average hourly wage for a non-management, private sector worker is about $20.70. Today’s average hourly wage has roughly the same buying power it did in the late 1970s.
The fact that wages haven’t increased while the cost of everything else – including housing – has gone up means we are seeing an increasing wealth gap.
In the mid-2000s, rates of home ownership were at a high of nearly 70 percent. However, that’s fallen now to about 63 percent – which is the lowest its been in a quarter century. This doesn’t include the millions of homes that are still teetering on the brink of foreclosure, or in negative equity standing.
Meanwhile, rental rates are soaring. Not only are these the millions who lost their homes in foreclosures, but also older folks who are downsizing and younger people who are staying in the rental market longer. Even those who want to buy a house and have some capital are often deterred by overzealous underwriting standards that were enacted after the housing bubble burst.
There is also an incentive for young families who want their kids in good school districts to rent. It’s far more affordable than trying to buy a house. Many of these single-family rental homes were snapped up by investors at the bottom of the market. But that means not only are the people who are renting less invested in their neighborhoods, they are not experiencing the same kind of financial growth as their neighbors. Instead, they see their rent charges rising steadily – so they are actually losing money.
And this is troubling when you consider in some areas, the growth of wealth has been substantial. In San Jose, for example, a typical homeowner has seen their housing values appreciate by more than $210,000.
Miami reportedly had the third-highest income gap in the country. While the rate of homeownership here fell by more than 3 percent from 2000 to 2013, homeowners saw their household wealth rise by more than $50,000 just attributable to their rising home values.
If you’re battling debt collection in Miami or the surrounding areas contact Jacobs Legal for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Tuesday at 6 p.m. on “Debt Warriors with Bruce Jacobs and Court Keeley,” discussing foreclosure topics that matter to YOU.