Housing Recovery by Income in Two Metros: San Francisco and St. Louis

by Alex Hermann
Research Assistant

The increases in home prices that have occurred since the Great Recession not only vary across the nation’s metropolitan areas, they also vary within many metros as well. The San Francisco metropolitan area, where home values are now 16 percent above their pre-recession peak, and the St. Louis metropolitan area, where home values are still 10 percent below their pre-recession peak, illustrate these variations.

In both areas, median home prices in low-income ZIP Codes are less likely to exceed mid-2000 peaks than median prices in high- and moderate-income ZIPs. However, the regions vary when looking at the changes in house prices between 2000 and 2016. Over that time period, the percentage increase in median prices in the Bay Area’s low-income ZIPs was greater than the increases in high- and moderate-income ones. In contrast, the percentage increase in St. Louis’ low-income ZIP Codes was much smaller than the increase in that region’s high- and moderate-income ZIP Codes. (In this analysis, low-, moderate-, and high-income ZIP Codes have a median household income under 80 percent, between 80 and 120 percent, and above 120 percent of their state’s median income, respectively.)

Changes in home price also vary within both metros. For example, metropolitan San Francisco has had the eighth strongest post-recession recovery in home prices. As a result, median home values in San Francisco’s high-income ZIP Codes are about $1.18 million dollars while the median value in low-income ones are $586,000, more than three times the median price for the U.S. as a whole, which is $186,500.

However, home values in many of the region’s ZIP Codes are still below their pre-recession peak (Figure 1). In all, 31 of San Francisco’s 142 ZIPs, or 22 percent, have yet to regain their mid-2000 peaks, including:

• 50 percent (5 of 10) of low-income ZIPs
• 35 percent (12 of 34) of moderate-income ZIPs, and
• 14 percent (14 of 98) of high-income ZIPs.

Source: JCHS tabulations of Zillow Home Value Index data and ACS 2014 5-year data

Most ZIP Codes that have not regained their peak median home values are located on the outskirts of Metro San Francisco, particularly in northern Contra Costa County. That area is home to 10 of the 14 high-income ZIP Codes where median prices have not exceeded their pre-recession peak as well as 8 of the 12 moderate-income ones and three of the five low-income ones. Most of the remaining ZIP Codes where prices are still below pre-recession peaks are in the urban areas south of Oakland along the East Bay, which includes many low and moderate-income ZIP Codes as well as two high-income ones.

Although prices in San Francisco’s low-income ZIP Codes are less likely to regain their pre-recession peaks, the trend is different when examining price changes since 2000. Overall, home values increased in all the region’s ZIP Codes. But on a percentage basis, the values in low-income ZIP Codes increased more rapidly than those in high-income areas (Figure 2).

JCHS tabulations of Zillow Home Value Index data and ACS 2014 5-year data

The story is somewhat different in metropolitan areas that have not seen San Francisco’s rapid price appreciation, such as St. Louis, where home values in June 2016 were still 10 percent below their pre-recession peak. There, median prices exceeded their peaks in only 27 of 147 ZIP Codes, most of them located in the region’s urban core and suburban Madison County. (Figure 3). These unrecovered areas include:

• 1 of 35 (3 percent) low-income ZIPs
• 6 of 55 (11 percent) moderate-income ZIPs, and
• 20 of 57 (35 percent) high-income ZIPs.

JCHS tabulations of Zillow Home Value Index data and ACS 2014 5-year data

Moreover, unlike San Francisco, prices in low-income ZIP Codes in St. Louis have grown only modestly since 2000 and have increased much less than those in high- and moderate-income ZIP Codes. In the run-up to peak, prices in low-income ZIP Codes grew only marginally faster than prices in high-income ZIPs. Additionally, the post-recession upturn in home values in low-income ZIPs lagged the increase in high-income ZIP Codes by nearly two years (Figure 4).

JCHS tabulations of Zillow Home Value Index data and ACS 2014 5-year data

What to take away from this analysis? Overall, home values in high-income ZIP Codes have outpaced home-value gains in low-income ZIPs since the price peak of the mid-2000s. When taking a broader view, low-income ZIP Codes have performed as well as high-income ZIPs since 2000 in fast-appreciating markets like San Francisco, while in many lagging markets, like St. Louis, home value gains in high-income ZIPs have typically surpassed those in low-income ZIPs. Furthermore, though income levels are important they are not determinative. The geographic patterns also underscore the fact that trends in home values are also a function of features such as density and proximity to the central city.

These relationships, and others, will be discussed in a forthcoming Joint Center working paper on home value trends since 2000.

High-Income ZIP Codes Benefit Most from Housing Recovery

by Alexander Hermann
Research Assistant

Although home prices nationally have been on the upswing since early 2012, the increases have not only been uneven across metropolitan areas but are more likely to have occurred in the most affluent parts of each metropolitan area, according to a new Joint Center analysis of Zillow home value data.

Most notably, home values in high-income ZIP Codes that are home to their region’s more affluent residents are now about 1 percent higher than their post-2005 peak, while values in low-income ZIP Codes—which increased dramatically in the early 2000s—are still about 12 percent below their pre-recession peak. Moreover, home values in moderate-income ZIP Codes are still about six percent below their pre-recession peak (Figure 1). (In this analysis, low, moderate, and high-income ZIP Codes have a median household income less than 80 percent, between 80 and 120 percent, and above 120 percent of the state median income, respectively.)

Source: JCHS tabulations of Zillow Home Value Index data and ACS 2014 5-year data.

Moreover, home prices in low-income ZIP Codes are lagging both in recovered metropolitan areas as well as in metros yet to regain their peak price. Specifically, in recovered metros, 83 percent of high-income and only 65 percent of low-income ZIP Codes had median home values matching or exceeding their peak, a full 18-point difference. In metro areas within 15 percent of peak, but still below, 22 percent of high-income ZIP Codes have recovered relative to 9 percent of low-income ZIP Codes. In metropolitan areas furthest from peak—by one measure, those that remain hardest hit—only a sliver of low-income ZIPs (5 of 699) have recovered, compared with 37 of 899 high-income ZIP Codes (4 percent). In total, across the nation, 37 percent of high-income ZIP Codes have recovered, versus only 23 percent of low-income ZIP Codes (Figure 2).

Source: JCHS tabulations of Zillow Home Value Index data and ACS 2014 5-year data.

Extending the analysis to 2000 demonstrates why high-income ZIP Codes have been more likely to recover. Low-income ZIP Code home values increased tremendously during the housing boom, but a similarly harsh decline has made recovery more difficult, and has significantly weakened low-income ZIP Code home value gains since 2000 relative to high-income ZIPs. At peak, the median home value in low-income ZIP Codes more than doubled (increasing 101 percent) from January 2000 (Figure 3). The peak median value in high-income ZIP Codes increased only 82 percent. However, the post-recession decline wiped out a large share of the relative gains low-income ZIP Codes had made. In these ZIPs, median home values (as a percent of the January 2000 home value) dropped nearly 65 percent. In high-income ZIP Codes, the drop was 38 points. This precipitous decline, and a lagging recovery, have given high-income ZIPs a narrow edge in median home value increases overall. As of June 2016, median home values in high and low-income ZIPs were 84 and 76 percent, respectively, above their 2000 median home value.

Source: JCHS tabulations of Zillow Home Value Index data and ACS 2014 5-year data.

The overall trend varies somewhat when breaking ZIP Codes down into recovered and unrecovered metros. In recovered metros, median home value gains in high-income ZIP Codes have steadily outpaced those in low-income metros over time, sharply accelerating during the recovery (Figure 4). In unrecovered metros (which include nearly 70 percent of ZIP Codes in our sample), home values in low and high-income ZIP Codes have drawn about even in the long run (Figure 5). Figure 5 also shows that the metros worse off relative to past peaks are those where low-income ZIPs saw substantial home value gains relative to their initial home value and large declines during the recession. In these unrecovered metros, ZIP Codes in both categories have median home values about 79 percent above their 2000 values.

Source: JCHS tabulations of Zillow Home Value Index data and ACS 2014 5-year data.

Note: Percentage growth derived from nominal dollars.

Source: JCHS tabulations of Zillow Home Value Index data and ACS 2014 5-year data.

In an upcoming post, we’ll take a closer look one US metro that illustrates the uneven price recovery within its own ZIP Codes – San Francisco.

Metro Data on Rental Cost Burdens Show Uneven Improvement

by Alexander Hermann
Research Assistant

The national trend in cost burdens is reflected across most metropolitan areas of the US. Looking at the 100 largest Metropolitan Statistical Areas (MSAs) by population that have not undergone geographic boundary changes between 2005 and 2015, shows that in most metros, cost burden rates declined modestly for renters in 2015, but were still high relative to their levels in 2005. (A household is defined as cost-burdened when it spends more than 30 percent of its income on housing.)

Looking at cost burden rates among the top metros as a group, we find the number of metro areas with exceedingly high cost burden rates declined in 2015. Indeed, the number of metros where cost burdens affect at least half of all renters declined from 44 metros in 2014 to 33 in 2015, which is a significant improvement from 2010 levels, when cost burdens affected half of all renters in 65 metros. In total, between 2010 and 2015, fully 83 metros saw declines in the share of cost burdened renters.

Even with these improvements, however, the share of cost-burdened renters is still above 2005 levels in most metros. More than half of rental households were cost-burdened in 33 metros in 2015, an increase of 11 metros from 2005 (Figure 1). Moreover, renter cost burden rates in 66 metros were higher in 2015 than they were in 2005.

Source: JCHS tabulations of US Census Bureau, 1-Year American Community Survey estimates via Factfinder.

This trend is also evident for the more extreme measure of severe cost burdens (those paying more than 50 percent of income for housing). From 2014 to 2015, the number of metros with severe renter cost burden rates of 25 percent or more declined from 63 to 49 of the top 100 metros, respectively (Figure 2). This is a big improvement from 2010, when 79 metros had such high rates of severely cost-burdened renters, but still worse than in 2005, when it was just 37 metros.

Source: JCHS tabulations of US Census Bureau, 1-Year American Community Survey estimates via Factfinder.

Indeed, despite significant near-term improvement, severe cost burdens have yet to return to 2005 levels in most metros. In the 100 largest metros for which data extends back to 2005, 60 had larger shares of severely cost-burdened renters 2015 than in 2005.

Lastly, initial analysis finds that the 2015 data also show the profile of metros with the highest burden rates appears to have shifted somewhat. In 2015, metros with the highest shares of severely cost-burdened renters are generally the large metros with tight housing markets along both coasts, including New York, Miami, and Honolulu. In 2005, the profile of metros with this high share of severe cost burdens was different; though some coastal metros were included (like Miami and Stockton, CA), midwest and declining industrial metros were more prevalent among the severely cost-burdened metros (including Cleveland, Detroit, Rochester, and Memphis).

We’ll post additional analysis on this dataset in the coming weeks and months.

See the full metro Excel table for a complete set of metro-level cost burden data for 2015.

New Data Shows US Renter Cost Burdens Easing, But Still Elevated

by Dan McCue
Senior Research
Associate

The number of renters paying 30 percent or more of their income on housing decreased in 2015 by 240,000 households, reversing an eight-year trend of annual increases in the number of “cost-burdened” renters, according to new data released last week by the US Census Bureau. Unfortunately, however, the decrease was very modest in comparison to previous years. Indeed, the decrease in rent-burdened households recorded in 2015 was less than half the increase recorded in 2014. Moreover, the data show that there still are 21.4 million “cost-burdened” renters in 2015, 1.15 million more than in 2010 and fully 4.0 million more than in 2005 (Figure 1).

Source: JCHS tabulations of US Census Bureau, 2015 1-Year American Community Survey estimates via FactFinder

The data also show some improvement in the number and share of “severely burdened” renters (those paying 50 percent or more of their income on rent). However, this growth was not enough to return to the pre-recession levels of 2008 and earlier. Overall, the number of renters paying 50 percent or more on rents decreased from 11.50 million to 11.28 million in 2014–2015, which was the lowest number since 2010. The share of renters with severe burdens dropped from 26.6 percent of all renters in 2014 to 25.8 percent in 2015. This is the lowest rate recorded since 2008, when 25.0 percent of renters paid 50 percent or more of incomes on housing.

In addition, the decline in the overall number of cost-burdened renter households in 2015 masked some worsening of cost burden rates within many income groups (Figure 2). Among people earning $20,000-to-$34,999 annually (which in many areas is still a low and/or moderate income), the share of those who were cost-burdened rose from 70.8 percent in 2014 to 71.3 percent in 2015. While a much smaller share of renters making more than $35,000 a year are cost-burdened, there were modest (less than one-percentage point) increases in the share of cost-burdened households, for these renters as well. In comparison, while more than 80 percent of the renters who make less than $20,000 a year are cost-burdened, that figure fell by less than one percent between 2014 and 2015.

Source: JCHS tabulations of US Census Bureau, 2014 and 2015 1-Year ACS data.

Taken together, these shifts suggest that the overall decline in cost-burden rates for renters is due to growth in the number of renters with higher incomes and a decline in the number of low-income renters. While this could be viewed as a positive trend for renter households as a group, the fact that renter burden rates continue to grow within and among higher income groups suggests affordability problems are growing across the income spectrum and even for higher income groups.

Tomorrow, we’ll take a closer look at the improvement trends across various metropolitan areas.

Developing a “New Urban Agenda” in Paraguay

by David Luberoff
Senior Associate Director

Since urban growth has come relatively late to Paraguay, the South American country has had the opportunity learn from the successes and failures of others, noted Maria Soledad Núñez, Paraguay’s Minister of Housing and Habitat in a Brown Bag talk hosted by the Joint Center for Housing Studies at Harvard’s Graduate School of Design on September 12.

The youngest person ever appointed a Cabinet-level minister in Paraguay, Núñez, who was appointed in 2014, when she was 31 years old, recalled that accepting the post represented a major change for her, as she had spent almost a decade working at NGOs that advocated on behalf of those living in slums in her country and other parts of Latin America. Although she worried about whether she would be given the authority to move forward with the ambitious policies she had been advocating, she ultimately decided that the opportunity was too promising to pass up.  

At her talk, which was co-sponsored by the Harvard Urban Planning Organization, Núñez recalled how, when she became minister, she pressed for a dramatic increase in the production of social housing for low-income families. At the time, the Ministry had been building less than 2,000 units a year and most observers didn’t think it had the capacity to even double that amount. Now, however, the Ministry is building more than 10,000 housing units a year. Núñez is also trying to build on that success by focusing not only on building new housing but also ensuring that the new units are part of larger plans to implement the country’s New Urban Agenda, which seeks to create viable and vibrant communities.

As part of those efforts, Núñez added, the Ministry is working with the local government of Asuncion, the capital and Paraguay’s largest city, to relocate low-income residents living in areas regularly subject to flooding from the Rio Paraguay to better housing and to transform some of those areas into badly needed open space for the city’s residents. She also is leading the country’s National Committee of Habitat, which comprises more than 50 public and private institutions that are working together to carry out the country’s urban plans.

Download Minister Núñez’s presentation
(Source: SENAVITAT, National Secretariat of Housing and Habitat of Paraguay)