The Philly region has gained high-income homeowners and lost those with middle and low incomes

High-income homeowners accounted for 71% of the $8.2 trillion in housing wealth gained in the last decade, and low-income owners just 4% — a gap that is increasing over time, according to a report released Wednesday from the National Association of Realtors.

From 2010 through 2020, as home prices have risen, the distribution of housing wealth across incomes has grown more uneven. Middle-income homeowners gained about a quarter of the increased wealth, despite being the largest share of the home-owning population, according to the report.

The home ownership rate at every income level has declined since the Great Recession. But the largest decline was among middle-income households, thanks to home price increases and the loss of homes during the foreclosure crisis. The home ownership rate among middle-income households dropped from about 78% in 2010 to roughly 70% in 2020. The Philadelphia region was one of the metropolitan areas that lost the highest number of middle-income homeowners in that decade — more than 22,000.

Middle-income wage earners are increasingly being priced out of home buying.

» READ MORE: Philly-area homeowners are building wealth quickly, thanks to rising prices

“If a home is not even affordable to your middle income [buyers], then that really says something about affordability,” said Gay Cororaton, senior economist and director of housing and commercial research at the National Association of Realtors.

During the same time, the number of low-income homeowners in the Philadelphia metropolitan area, which includes Camden and Wilmington, dropped by nearly a quarter. Meanwhile, the share of high-income homeowners in the region greatly increased. These owners now make up almost a third of the home-owning population.

“Addressing the housing shortage so that homes become more affordable will be crucial to changing the pattern of housing wealth distribution,” Cororaton said.

The National Association of Realtors defined low-income homeowners as those making up to 80% of their area’s median income, middle-income homeowners as those making more than 80% and up to 200%, and high-income homeowners as those making more. For a household of four in the Philadelphia region, low income would be defined as $75,600 or less and middle income as over $75,600 up to $189,000.

» READ MORE: High prices and low supply make buying a home harder, especially for Black households

The country as a whole added nearly 980,000 middle-income homeowners from 2010 to 2020, but the share of low- and middle-income homeowners and their share of overall housing wealth shrank. The share of high-income homeowners and their piece of housing wealth grew.

Home ownership can be vital in helping households achieve financial stability, said Leslie Rouda Smith, president of the National Association of Realtors.

“We must focus on increasing access to safe, affordable housing and ensuring that more people can begin to amass and pass on the gains from homeownership,” she said in a statement.

The Philadelphia region’s housing market has long been considered relatively affordable. But the low wages of Philadelphians make housing unaffordable for many. The average Philadelphian can no longer afford the average Philadelphia home, according to analyses by Drexel University economist Kevin Gillen.

The Philadelphia metropolitan area lost 23% of its low-income homeowners between 2010 and 2020, according to the National Association of Realtors.

The region had about 3% fewer middle-income homeowners in 2020 than a decade earlier.

Meanwhile, the region’s high-income homeowners grew by 79%.

So in 2020, the Philadelphia metro’s population of homeowners was 41% middle income, 31% high income, and 28% low income, which is about in line with the country as a whole.

Several factors are likely contributing to the changes in the regional home-owning population.

“The old gateway cities — New York, Chicago, Boston, Philly — they’re the ones that lost a lot of middle-income homeowners,” said Cororaton of the National Association of Realtors. That’s partly due to the migration of residents west and south to states that have relatively more affordable homes and have seen robust job growth.

Higher-income residents of more expensive areas such as New York also have been moving to the Philadelphia area, contributing to the rising share of high-income homeowners. The Philadelphia region also has continued to attract and retain professionals through its medical and life sciences industries and universities

“It could reflect some structural shift that’s happening to the Philadelphia economy,” Cororaton said.

Lingering effects of the housing collapse that preceded the Great Recession also are at play. Low- and middle-income homeowners were more likely to have lost homes to foreclosure. It can take years to repair bad credit, and it took the unemployment rate about a decade to get back to where it was before the Great Recession, Cororaton said. By the time struggling former homeowners were able to return to the real estate market, housing supply had tightened, they didn’t have home equity to use toward buying a new house, and housing prices had risen.

» READ MORE: Gaps in Black and white home ownership transcend a booming market and threaten to leave some behind

High-income homeowners have the wealth to weather financial challenges and were less likely to lose their homes during the foreclosure crisis.

Low-income households also are less likely to be able to afford homes as prices rise, so they may remain renters. With rising rents and less money to stash away, saving money for home ownership becomes more difficult. So aspiring homeowners get stuck.

The median sales prices in the Philadelphia metro was $300,000 in January, according to the multiple listing service Bright MLS. It was $205,000 in January 2010.

The region’s median property value in 2020 for low-income owners was $407,823, middle-income owners was $511,943, and high-income owners was $794,669, according to Census Bureau data.

“Home ownership is the biggest source of wealth for many people, for the typical family,” Cororaton said. “So if you lose home ownership, you lose access to a major source of wealth.”

That wealth helps families enhance their quality of life, pay for children’s education, and climb up the income ladder.

“If homes continue to price at this pace, it will be harder for the low- and the middle-income [households] to access homeownership,” Cororaton said. “Policies really need to be geared toward increasing housing supply at the affordable level so more people can reap the wealth gains from home ownership.”

The Philadelphia Inquirer is one of more than 20 news organizations producing Broke in Philly, a collaborative reporting project on solutions to poverty and the city’s push toward economic justice. See all of our reporting at brokeinphilly.org.