Diverging Fortunes: Winners and Losers in the Pandemic Housing Market

The pandemic housing market created over $6 trillion in new wealth, according to an article by Emily Badger and Quoctrung Bui. 

It’s a remarkably positive story for Americans who own a home; it’s also inseparable from the housing affordability crisis for those who don’t.

“That dual reality follows what has been a mass wealth creation event with few precedents in American history,” the article continues. “During the last housing boom, the run-up in home values was similarly dizzying but limited to fewer parts of the country. And that equity largely vanished in the kind of bust that economists say is far less likely to happen this time.”

The authors clarify that “this wealth is not the same as having money parked in a bank account, of course. To use it, households must sell a home or tap its value through a tool like a home-equity loan, and that’s not risk-free. But evidence shows that homeowners wield home equity in real ways — to send their children to college, to start businesses or to invest further in housing, building even more wealth.”

Rising costs, however, are putting homeownership as a means of wealth creation out of reach for many more households. “It will amplify inequality, as gains go disproportionately to baby boomers (at the expense of millennials who will one day buy their homes), and to white households, who have a homeownership rate that is 30 percentage points higher than that of Black households.”

According to Benjamin Keys, a professor at the Wharton School of Business, the recent boom in home prices happened largely because building new housing is so difficult in the United States. This leads the authors to an alarming conclusion: because high home values benefit existing homeowners, who often resist new construction near them, “that could make the case for building more of it harder still.”