Middle class households made more than $2 trillion from homeownership over the past decade, showing it’s still a great way to build wealth

Younger households with middling incomes who bought a home within the last 10 years have been able to enjoy massive wealth gains, with housing wealth across nearly 1,000 U.S. cities increasing by over $8 trillion since 2010, according to a new study by the National Association of Realtors.

For middle class households, total housing wealth grew by $2.1 trillion, which is 26% of overall housing wealth gains over that time period.

The main reason behind these homeowner wealth gains is the rapid rate of home value appreciation in the U.S. The NAR estimates that 86% of the wealth homeowners built during this period comes from home appreciation, with the median sales price of a home rising at an annual 8.3% between 2011 and 2021.

Some metro areas saw middle income residents’ wealth increase much faster than others, normally due to population or job growth in the city in question, NAR found.

Best middle income housing markets

NAR said the metro areas where middle-class homeowners saw the biggest wealth gains over the past 10 years are:

1. Phoenix-Mesa-Scottsdale, Ariz. (+ $103,690)
2. Austin-Round Rock, Texas ($61,323)
3. Nashville-Davidson-;urfreesboro-Franklin, Tenn. ($55,252)
4. Dallas-Fort Worth-Arlington, Texas ($53,421)
5. Houston-The Woodlands-Sugar Land, Texas ($52,716)

But while most metro areas saw household wealth grow for middle income homeowners, 58% of cities according to the NAR, it declined in cities that have seen their housing markets explode over the last decade. Los Angeles and New York topped the list with big declines for middle income households, despite housing wealth increasing overall.

And while household wealth for middle income earners grew overall, the same could not be said for lower income homebuyers. Low income households make up 27.2% of all homeowners, but enjoyed only 4% of the wealth gain.

A changing housing market

The prospects of building wealth through homeownership is enticing to young households ready to make their first big purchase. For millennials, who have aged into prime homebuying age and are now the single largest demographic looking to buy a home, this is more applicable than most.

But for millennials and even younger Gen Z homebuyers in 2022, buying a home has become a nearly impossible feat.

While younger generations are flooding the homebuying market, the pandemic and remote working options have made homeowners less willing to sell. And combined with a historically low inventory of new homes for sale, supply has been unable to keep pace with demand over the past year.

The high competition for new homes has priced many young homeseekers out of the market, as older generations looking to downsize have been able to leverage higher incomes and more years of real estate savvy to win out on bidding wars.

The result has left many millennials either unable to buy a home and begin building wealth, or unhappy with a rushed purchase and readying to sell early before seeing any big benefits from appreciation.

For those who are homeowners during this turbulent period for housing, home appreciation rates are better than ever. Median home values are now 20% higher than they were in January 2021, according to Zillow, an online real estate marketplace.

Correction, March 23, 2020: A previous version of this article misstated the average increase in value for a middle class home over the past 10 years.