There’s a lot of housing price inequality in markets across the U.S. And that may be a good thing.
New York, Michigan and Connecticut are the top three states where home price inequality is highest, according to a recent LendingTree report. But a larger range between the highest priced homes and the lowest priced homes on the market may be a good thing, as it gives buyers a range of options.
“Cities with more home value inequality have a wider distribution of home values, which means that families earning lower incomes may still have the opportunity to access home ownership in these cities,” the report states.
In fact, because home values have finally recovered from the 2008 housing crisis, affordability is now a concern, says report author and chief economist Tendayi Kapfidze. “In many large cities, the median-priced home is now out of reach of median income households,” he adds.
To find the housing cost inequality in each state, LendingTree calculated each state’s GINI coefficient, condensing the distribution of a state's housing prices into a number between 0 and 1. The closer the number is to 1, the more inequality has been detected.
High home prices by themselves don’t always indicate inequality. For example, LendingTree also finds that, of major U.S. cities, Detroit, Birmingham and Indianapolis have the highest rates of inequality. But study after study shows us that the highest home prices in America are concentrated in the San Francisco and San Jose metro areas.
Wyoming, Montana and Alaska are the states, and Salt Lake City, Portland and Denver are the major cities, with the lowest home price inequality. These housing markets, while more equal, tend to have fewer affordable homes on the market for borrowers with lower incomes, according to the report.
Savvy buyers can use inequality to find markets with a wider range of accessible options. For example, LendingTree finds that Michigan is one of the states with the highest home price inequality. But it’s also one of the states where CNBC Make It reported you only need to make about $40,000 a year to afford the average home, which costs about $160,000.
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