A new study from online loan marketplace Lending Tree looks at home price inequality in a community using a statistical tool, the Gini coefficient, to measure price distribution in 50 U.S. metros.
The study finds that metros with a greater range of home prices, those that are most unequal in their price distribution, offer a wider variety of homebuyers, allowing them to enter the market more easily, especially at lower price points. MarketWatch reports that Rust Belt cities like Detroit, St. Louis, and Indianapolis are "the most unequal," due in part to declining populations and fewer high-priced homes. LendingTree’s chief economist Tendayi Kapfidze explains that more equal markets like Denver, Salt Lake City, and Portland, Ore., have “lower-priced homes being bid up because of demographics and income."
There are some big caveats to the notion that more homes at cheaper prices is a panacea. Among other things, LendingTree’s analysis, which Kapfidze calls “whimsical,” doesn’t take into account incomes in each of the metros it surveyed. He thinks there’s room for a follow-up or two. Another consideration: lenders are usually reluctant to make small mortgages. Each time they write a loan, there are fixed costs, so if they can’t recoup that money through interest payments on the mortgage, or from the kind of banking relationship that may come with a customer who qualifies for a big home loan, they often avoid mortgages lower than $70,000 or so.
Advertisement
Related Stories
Market Data + Trends
Vacation and Investment Home Market Insights
A recent report finds beach homes to be the most sought-after vacation-home type and that the investment potential of a second home is an important factor in the purchasing decision
Affordability
How Much Income Do First-Time Buyers Need to Afford the Average Home?
The median-priced home is unaffordable in 44 of the 50 largest U.S. metro areas
Affordability
What Is the Relationship Between Urban vs. Suburban Development and Affordability?
A new paper from Harvard's Joint Center looks at whether expanding the supply of suburban housing could, in turn, help make dense urban areas more affordable