Just as inequality is present in social and cultural sects of society, so too is it present in real estate. In fact, where you live can have an enormous effect on your future net worth. Right now, the United States’ most expensive residential markets are appreciating at faster rates than their less expensive counterparts. How fast? Two times.
Whereas in 1986, the average price in America’s most expensive market hovered around $127,058, it is now at $493,504. Comparatively, the average price of a home in the least expensive market was $52,022 in 1986. Now it’s $117,827. That means homes in the more expensive bracket increased at an incredible 320% faster than the less expensive markets.
That, in turn, indicates that buyers who were able to purchase more expensive homes previously have seen a much, much larger return on their investment, which further means that their descendants will have access to considerably more wealth than others. Thus, inequality is further bolstered in full force.
Additionally, this discrepancy is not likely to change anytime in the near future. If anything happens at all, it is bound to take generations. The influencing factors are simply so broad, so expansive, that to enact any real lasting change will be an immense project. The rising costs are primarily due to income growth and housing supply.
In more expensive markets, buyers have more money and more income. This means they can afford to buy more expensive homes. This ability then translates to higher competition and thus faster growth and appreciation.
Just as well, less expensive markets generally have more building activity, which means more supply, which means less expensive homes. So demand does not increase to the extent it would, say, in San Francisco, because more homes are being built, so there are more homes to choose from, and by extension less reason to push up prices.
If you’re looking to maximize home appreciation rates, these are the cities with the largest return since 1986:
San Francisco, California
San Jose, California
Orange County, California
Los Angeles, California
San Diego, California