Nationally, real estate markets are diverging. Instead of every one eventually regressing to some mean, the richer markets are so rising fast and far that poorer markets are getting left behind. For a long time conventional wisdom was that poorer markets will eventually catch up because richer markets would stall when the market is saturated. Nice idea, but it isn’t happening. Trulia found that by looking into the last 30 years.
“The pack of most expensive markets is diverging from the rest. The priciest metros were 144% more expensive than the least expensive metros in 1986 but that differential has grown to over 319%.”
Thirty years ago, Seattle wasn’t one of those pricey cities, but now it is. That means we’ve seen some of the greatest growth in real estate wealth in the nation at 404 percent. The only regions that did much better were San Francisco (558 percent) and San Jose (497 percent). Seattle was essentially tied with Portland and Honolulu.
At least for Seattle, income growth gets some of the credit. Again, only San Francisco (210 percent) has seen higher income growth than Seattle (168 percent); even beating out San Jose (157 percent).
Add in the generational influences where inheritances are largely from real estate and;
“...since the priciest metros continue to diverge from others, these geographic disparities are sure to persist into the near future.“
What it means for homeowners is, it was far easier to make hundreds of thousands of dollars by buying in expensive markets than by buying in cheaper markets. Someone who bought a Seattle median-priced house in 1986 could be worth an extra $330,512, hypothetically.
It also means wealth inequality between regions is becoming reinforced. Geography is becoming more important than build quality. Investors are concentrating on concentrated markets. And, even with similar jobs and households, people in different cities are accumulating wealth to different degrees.
That old real estate adage of “Location, Location, Location” is now true for cities, not just for houses.
- Rich City, Poor City [Trulia]