Home val­ues point to a sharp wealth di­vide within US cities

Kuwait Times - - BUSINESS - WASH­ING­TON:

It’s still pos­si­ble in Bos­ton for a mail car­rier, an ac­coun­tant and a Har­vard-trained psy­chi­a­trist - ba­si­cally, the crowd from “Cheers” - to live as neigh­bors. That find­ing by the real es­tate bro­ker­age Redfin makes the cap­i­tal of Mas­sachusetts a rar­ity at a time when neigh­bor­hoods in most US cities are in­creas­ingly iso­lated from each other by in­come and home val­ues.

Redfin an­a­lyzed home sales over the past 24 months in 20 ma­jor US cities, break­ing down the data by neigh­bor­hood. Many of the cities re­flect home val­ues that have out­paced wages over the past 15 years and con­trib­uted to a widen­ing wealth gap among neigh­bor­hoods that mir­rors a na­tional trend.

San Francisco, for ex­am­ple, en­joys the ben­e­fits of tech for­tunes, but its homes are largely un­af­ford­able for the po­lice of­fi­cers, fire­fight­ers and teach­ers the city needs. And while hous­ing in Bal­ti­more seems af­ford­able, low and un­sta­ble in­comes there have de­pressed home own­er­ship rates. Rib­bons of high­ways have also fer­ried the mid­dle class out of cities such as Detroit, leav­ing be­hind con­cen­tra­tions of poverty.

Redfin said its anal­y­sis is a first step in ex­am­in­ing changes over time in neigh­bor­hoods and in eco­nomic mo­bil­ity. “Our ar­gu­ment is the shape of the Amer­i­can city is the shape of Amer­i­can life,” said Glenn Kel­man, CEO of Redfin. “When the only time you meet some­one wealthy is when you’re hand­ing them a crois­sant, the like­li­hood that your kids are go­ing to at­tend a good school and know how to pursue a ca­reer go down.”

More than half of Bos­ton con­tains a mix of high-end and af­ford­able homes, com­pared with a na­tional av­er­age of 13 per­cent. Bos­ton’s most eco­nom­i­cally mixed neigh­bor­hoods tend to be cen­tered around its Roxbury dis­trict, a sec­tion that has been pre­dom­i­nantly work­ing class, black and Latino in a city with a long history of racial and eth­nic di­vi­sions. Its grow­ing eco­nomic di­ver­sity re­flects the chang­ing char­ac­ter of Roxbury, where many mid­dlein­come home­buy­ers are set­tling af­ter be­ing priced out of other sec­tions of Bos­ton.

The trend has un­folded in Roxbury neigh­bor­hoods such as High­land Park and Egle­ston Square. Real es­tate bro­ker Christopher Buono said higher prices over the past five years in other ar­eas of Bos­ton have led more buy­ers into th­ese neigh­bor­hoods. And the steady flow of stu­dents each year to the 35 col­leges in Bos­ton has made many homes at­trac­tive to in­vestors seek­ing to rent them out.

Pock­ets of Roxbury were close to aban­doned dur­ing the 1970s, said bro­ker Deb­o­rah Ber­nat. But ren­o­va­tions and de­vel­op­ment have in­tro­duced con­dos and town­homes with such lux­ury fea­tures as gas fire­places and bal­conies. The re­sult has been a mix­ture of blue-col­lar res­i­dents with startup ex­ec­u­tives. “Sus­tain­able in­te­gra­tion is the goal,” Ber­nat said. “It’s one of the things that I love about the neigh­bor­hood.”

To as­sess af­ford­abil­ity, Redfin com­pared sales prices to me­dian in­comes. Other cities with above-av­er­age lev­els of eco­nomic di­ver­sity in­clude Den­ver, Seat­tle and Wash­ing­ton, DC, which have ben­e­fited from an in­flux of ed­u­cated work­ers and tech­nol­ogy com­pa­nies.

But high-tech can also widen the wealth gap. Al­most all of San Francisco - the hub for the most prom­i­nent soft­ware and com­puter firms - con­sists of homes worth more than what a mid­dle-in­come fam­ily there can af­ford. Other cities, such as Bal­ti­more and Philadel­phia, con­tain small clus­ters of wealthy neigh­bor­hoods along with large swaths of rel­a­tively low-priced homes, but many res­i­dents lack the stable in­come and sav­ings to buy. In some cases, the data sug­gest that bet­ter-off res­i­dents work in a city but live in the sub­urbs, so that only a small share of the city it­self is eco­nom­i­cally di­verse. A mix of high-end and af­ford­able hous­ing ex­ists, for ex­am­ple, in less than 10 per­cent of San An­to­nio, Mem­phis, Jack­sonville, Detroit, In­di­anapo­lis and Colum­bus, Ohio.

Home val­ues be­gan to climb faster than in­comes in late 1999. Hous­ing prices had long hewed closely to gains in av­er­age hourly earn­ings. But a gap de­vel­oped be­tween the two dur­ing the hous­ing boom, nar­rowed slightly dur­ing the Great Re­ces­sion and then widened again once the econ­omy be­gan to re­cover roughly six years ago. The sep­a­ra­tion of neigh­bor­hoods by in­come has pre­vented chil­dren from pro­gress­ing eco­nom­i­cally, ac­cord­ing to re­search pub­lished last year by econ­o­mists at Har­vard Univer­sity and the Univer­sity of Cal­i­for­nia, Berke­ley. Bos­ton ranked fourth in up­ward mo­bil­ity. By con­trast, Jack­sonville, Detroit, In­di­anapo­lis and Colum­bus each ranked to­ward the bot­tom.

Many fam­i­lies face fi­nan­cial ob­sta­cles to send their chil­dren to schools that could en­hance their eco­nomic prospects. A mi­nor­ity of the coun­try can af­ford to buy homes in ZIP codes with high-qual­ity schools, ac­cord­ing to a re­port re­leased Thurs­day by Real­tyTrac, a real es­tate data com­pany.

Homes are too ex­pen­sive for av­er­age wage earn­ers in 65 per­cent of ZIP codes with el­e­men­tary schools where stu­dents per­formed above av­er­age on stan­dard­ized tests. The me­dian sales price for homes in ZIP codes with th­ese schools was $411,573 - nearly dou­ble the me­dian for homes in ar­eas with lower-per­form­ing schools. —AP

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