Homes that were foreclosed on during the housing crisis have since gained nearly twice as much value when compared with other homes, according to data from Zillow.
From the lowest point during the housing crisis to today, the average home value has risen 21.9%, while foreclosed homes have risen 38.9% in value, Zillow said in its report on foreclosures and wealth inequality released Tuesday.
Foreclosed homes nationwide lost roughly 40% of their value during the crisis, while other properties lost around 22% of their value. Today, foreclosed homes remain 16% off their pre-crisis peak versus other homes that are just 5% off, Zillow said.
These nationwide figures hide the progress made in certain parts of the country, though. Zillow noted that in Denver foreclosed home values dropped 22% in the recession but have grown by 75% since, putting the values roughly 40% above their pre-crisis peaks.
"After the national housing market hit bottom, home values started rising quickly again, especially among recently foreclosed, low-tier homes now seen as screaming bargains by investors looking to buy cheap but livable homes and convert them into rentals," Zillow chief economist Svenja Gudell wrote in the report.
This situation, Zillow found, has had the effect of making the wealthy wealthier and disadvantaging low-income individuals — many of whom were the homeowners that were foreclosed upon.
Less-expensive homes were more likely to be foreclosed on nationwide during the crisis when 46.7% of foreclosures occurred on entry-level homes in the lowest tier of values, compared to 36.8% for midtier homes and 16.6% for the most expensive tier. And in some cities, including Milwaukee and Philadelphia, more than half of the foreclosed homes were in the lowest tier.
Given that many of these foreclosed properties were entry-level homes, many homeowners across the country did not experience the benefit of the outsized increase in home prices. Investors, meanwhile, did, as they purchased many of these properties, Zillow said, adding to the benefits already seen through rental income.
Indeed, this gap continues to affect the ability of many prospective homeowners to buy a property.
"And there's still more salt to throw on the wound with the benefit of hindsight," Gudell wrote. "A homeowner who foreclosed on a home in 2007 would have theoretically been able to buy again in 2014, and may have realized some of the gains in housing of the past few years. But a homeowner that held out desperately only to finally succumb to foreclosure in 2010 or 2011, won't be able to buy again until 2017 or 2018."
