Housing Inequality Will Get Worse Before It Gets Better

Like so much else in the US economy, the housing industry is realizing that it pays to chase luxury these days. Even in a market that’s famously unaffordable, buyers looking for high-end finishes and communities with golf courses and pickleball courts are willing to pay up. At the entry level, price is the only differentiator. What is a savvy builder to do? Migrate toward the higher end of the market, of course.

That’s the scenario likely to play out as the fortunes of wealthy households and working-class Americans diverge in an economy where the stock market is booming, but the labor market is sluggish. The near-term implications are a slowdown in the construction of entry-level homes; hardly what’s needed to improve affordability. But what’s often missed is that, in the longer term, all building is good building: More luxury housing will have the effect of putting on the market more 20- and 30-year-old starter homes being vacated by millennials ready for an upgrade.