It’s all about access to homeownership, which has always been the foundation to building wealth in America.
The decadelong economic expansion has showered the U.S. with staggering new wealth driven by a booming stock market and rising house prices.
But that windfall has passed by many Americans. The bottom half of all U.S. households, as measured by wealth, have only recently regained the wealth lost in the 2007-2009 recession and still have 32% less wealth, adjusted for inflation, than in 2003, according to recent Federal Reserve figures. The top 1% of households have more than twice as much as they did in 2003.
This points to a potentially worrisome side of the expansion, now the longest on record. If another recession comes, it could be devastating for people who have only just recovered from the last one.
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Behind this trend: More than 85% of the assets of the wealthiest 1% are in financial assets such as stocks, bonds or stakes in private companies. By contrast, slightly more than half of all assets owned by the bottom 50% of households comes from real estate, such as the family home. Economic and regulatory trends over the past decade have not only favored stock over housing wealth, but have also made it harder for the less affluent to even buy a home.
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Since 2009, home prices have outpaced incomes, making it harder for families to purchase their first home.
Home prices have increased 41% since 2009
Income has grown 8%
Until the mid-2000s, the net worth of households across the wealth distribution increased at roughly the same pace, keeping inequality stable. That started to change when housing prices took off in the early 2000s. For the bottom 50%, rising home values were more than offset by mortgage debt, which almost doubled between 2003 and 2007. For the top 1%, debt was flat between those years. When the housing bubble burst, many less-affluent households saw housing wealth wiped out; some lost their homes altogether.
Today, the bottom half of American households aren’t carrying so much debt compared with the prerecession peak, after adjusting for inflation. And starting in 2012, a recovery in home prices has allowed their net worth to inch up. But house prices, adjusted for inflation, have yet to reach their 2006 peak, according to the S&P CoreLogic Case-Shiller index. Meanwhile, a decade of rising equity prices has buoyed the 1% wealthiest households, pushing the value of their financial assets up 72% since the recession, after adjusting for inflation.