Since 2000, the most expensive U.S. homes have nearly quadrupled in value, while homes in the lowest tier have not kept pace with inflation
The U.S. housing market has been on a steady upward trajectory since climbing out of the Great Recession in early 2012. As home prices have risen, millions of owners across the country have seen property values and housing wealth strongly increase. The unexpected pandemic homebuying frenzy that began in the spring of 2020 further escalated property values given the low mortgage rates at the time.
The Average U.S. Home Value Has More Than Tripled Since 2000
On average, U.S. homeowners have seen appreciation and housing wealth more than double over the past decade. The CoreLogic National Home Price Index (HPI) for December 2012 was 143.8; by June 2023, the index more than doubled to reach 306.8. Also, if accounting for the rise and fall of the U.S. housing market during the early 2000s, the average U.S. owner’s home value appreciation and housing wealth has more than tripled since 2000, when the index measured 100.
However, the overall trends obscure a disparity, where home value appreciation and rising housing wealth are unequal for high- and low-income households.
Disparity in Home Price Appreciation and Housing Wealth Creation Between Low- and High-Income Owners
Over the past two decades, data shows that properties in different price tiers have shown divergent appreciation trends. The bottom line in Figure 2 illustrates home appreciation trends for properties at the lowest price decile, while the top line captures those at the highest price decile. The difference is telling: As of June 2023, the average values of the lowest-priced homes are only 1.5 times their January 2000 values, while the average values of the most expensive homes are nearly four times their January 2000 values.
Using an annualized rate of appreciation that is not adjusted for inflation, property values in the bottom-price decile have risen by around 1.7% per year whereas those in the highest-price decile increased by 6.9% per year. If adjusted for inflation, which is about 2.5% per year over the same period, homes in the bottom-price decile actually lost value at a rate of -0.8% per year, while more expensive homes have stayed ahead of inflation, rising by 4.4% per year in real value.
The Widening Gap in Property Values and Housing Wealth Between High- and Low-Income Homeowners
Figure 3 and Figure 4 provide overviews of the same trends illustrated in Figure 2 by highlighting cumulative home price appreciation measured at four different points in time: June 2006, December 2012, June 2019 and June 2023, with each representing a key turning or reference point for the U.S. housing market. The steepness of each line indicates the disparity or gap between high- and low-price deciles at a given time; thus, the flatter lines represent a smaller disparity and the steeper lines show a larger gap.
The line representing home price appreciation by June 2006 is relatively flat suggesting that the housing boom of the early 2000s had similar effects on both low- and high-tier properties. Properties across the price deciles all experienced a similar increase in value, although those in the lowest-price decile somewhat lagged.
Homes in 10th-20th price decile rose by 90.4%, about the same as what was recorded for the highest-decile properties, at 90.8%. Homes in the 20th-30th price decile posted the largest price appreciation of 91.3%. So, at that point in time, lower-tier properties actually fared slightly better than more expensive homes (except for the lowest-price decile).
But by the time the housing market started recovering from the Great Recession in 2012, a sizeable gap had already emerged in favor of more expensive homes. Low-tier properties were the hardest hit by the housing market crash. By December 2012, home prices in the two bottom deciles had dropped below their January 2000 levels by as much as 34.3% among the lowest decile and 3.8% among those in the 10th-20th decile.
By contrast, more expensive homes held their value relative to those recorded in 2000, and they better weathered the crash. For instance, the excess home appreciation by the highest-decile properties relative to those in the lowest decile was 110%, 79.5% relative to the 10th-20th decile and 65.2% relative to 20th-30th decile. The top two deciles also fared better than middle-tier properties (50th-60th), emerging from the recession with 41.3% in excess home appreciation by the highest decile and 16.5.% by the second-highest decile.
That gap continued to widen for the next decade. By June 2019, property values in the bottom decile had not moved much from January 2000, appreciating by 6.6% in almost two decades. But home values homes in the top deciles more than doubled in that time frame, up by 159.1% in the highest decile and by 116% in the second-highest decile.
Although homes in the lower 10th-20th and 20th-30th deciles fared much better than the bottom 0-10th decile, the overall slope of the June 2019 line in Figure 3 nevertheless indicates a sizeable gap between the top and bottom deciles. The excess home value appreciation by the highest decile registered 88.7% above the 10th-20th decile and 69.8% above the 20th-30th decile. The gap between the highest decile and the 50th-60th decile was 56.4%, an increase of 15 percentage points since the December 2012 reading of 41.3%.
The June 2023 line in Figure 3 is the steepest of all, indicating that the gap widened even more during the pandemic housing boom. Properties in the highest decile have nearly quadrupled in value since January 2000 (up by 299.2%), and those in the 80th-90th decile have more than tripled (up by 221%). By contrast, despite also rising significantly during the pandemic housing boom, home values in the bottom decile further contracted.
By June 2023, the gap, or excess home price appreciation between the highest and bottom deciles, reached 251.1%, though homes in other lower deciles have fared much better and have more than doubled in value. At the same time, less expensive homes have not kept up with those at the very top, or even those in the middle. The gap between the highest decile and the 50th-60th decile has widened by nearly 40 percentage points since June 2019 (up from 56.4% to 95.8%).
Entry-Level Homes Are Not Homogeneous
Most reported home price indices are broadly constructed to measure overall market trends, thus compensating for the differences that may exist among different property tiers. Even price indices designed to capture entry-level or starter homes typically categorize the bottom one-third of homes as a homogeneous group. But as shown in Figure 2 above, homes in the lowest decile have behaved very differently and may warrant a separate analysis.
How Much Has Diminished Income Share by Low-Income Households Contributed to the Rising Gap in Property Value and Housing Wealth?
Just as the gap between property values and housing wealth has widened between high- and low-tier homes, the income gap between top-earning households and those in the bottom income quintile has also grown since the mid-1990s, as seen in Figure 5.
In early 2000, the share in aggregate income by households in the top 95th-100th of the income distribution was 21.5%, and the share by the lowest-income quintile households was 3.6%, a difference of 17.9%. By 2012, the share in aggregate income by households in the bottom income quintile fell to 3.2%, while the share accounting for the top 5% of households rose to 22.3%, widening the gap to 19.1%. At the end of 2021, the share in aggregate income from the lowest-income quintile households continued to fall, down to 2.9%, while the share of the top 5% of households continued to rise, reaching 23.5%. The gap between the highest- and lowest-income households is now at its highest level since the mid-1960s, at 20.6%.
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 To construct each price decile-specific price index, all annual sales (new and existing homes) in a given metropolitan statistical area (MSA) are used to calculate market-specific price deciles, which are then applied to repeat sales samples to construct decile samples. Those market-specific decile samples are then pooled across markets for the estimation of the price index for a given price decile. The largest 70 MSAs (in terms of the housing stock) are included in the calculations in this analysis.