Homes that were foreclosed during the housing crisis in the United States have gained almost twice as much value as other homes, according to a new analysis.
But the original owners of those homes have not benefited from that recovery as low end homes were much more likely to be foreclosed, the report from real estate firm Zillow shows.
It explains that during the run-up to the housing bubble, many low income earners bought homes, and the home ownership rate rose from about 65% in the middle of the 1990s to almost 70% in 2006.
However, when home values crashed in 2007, millions of home owners had to walk away, abandoning their initial investment and missing the opportunity to gain equity as home values recovered.
It also points out that 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, some 46.7% were among the least expensive third of homes. Only 16.6% 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% in value, while the average foreclosed home has risen 39% in value.
The report suggests that 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% over the past decade.
‘Income inequality is an important topic in the US right now, because the gap between the richest and poorest Americans is growing,’ said Zillow chief economist 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,’ she added.
Meanwhile, a separate report from the National Association of Realtors shows that at a national level, housing affordability is down from a year ago as higher prices continue to outpace household income growth.
Housing affordability declined from a year ago in April pushing the NAR index from 167.5 to 162.4. The median sales price for a single family home sold in April in the US was $233,700 up 6.3% from a year ago.
Regionally, all four regions saw declines in affordability from a year ago. The Midwest had the largest decline of 5.6%, the South had a decline in the affordability index of 3.4%, followed by the West with 2%. The Northeast had the smallest dip in affordability at 1%.
By region, affordability is down in all regions from the previous month. The Midwest with a fall of 6.2% had the biggest decline, followed by the South and West at 4.6% and 4.3% while the Northeast had the smallest decline in affordability of 3.4%.