12 cities where high home price inequality may actually be a good thing

Income inequality is a significant challenge facing America. But when it comes to real estate values in local markets, significant home price inequality may actually be a good thing, according to LendingTree.

A larger gap between the least and most expensive properties in a market means homebuyers have more purchasing options. When a real estate market booms — like the tech hubs along the West Coast — the lower home values rise, causing more equality in prices, but all homes become less affordability.

"Inequality is the defining economic debate of our times," said Tendayi Kapfidze, chief economist at LendingTree, in a press release. "Since 1980, the majority of income growth in the United States has accrued to the top of the income scale, a trend that accelerated following the 2007-2008 financial crisis. Home values have finally recovered from the most recent housing crisis to the extent that affordability is now a concern. In many large cities, the median-priced home is now out of reach of median income households."

LendingTree conducted a study comparing home prices in the 50 largest metro areas in the country. The cities were ranked by the Gini coefficient, a commonly used statistical measure of distribution. The coefficient ranges from 0 (complete equality where every value is the same) to 1 (complete inequality, where one entity has 100% of the value and all others have none). A higher Gini coefficient here means more inequality in housing prices.

The study also analyzed the values of the 5th and 95th percentile of home prices and provided the ratios between them to show another measure of home price inequality.

From the Rust Belt down to Alabama, here are the 12 housing markets with the biggest disparities in home prices. Midwestern cities with recovering housing markets head the list, with higher Gini coefficients and ratios between their 5th and 95th percentile home prices.

5th percentile home price: $75,000
95th percentile home price: $620,000
Ratio (95th/5th): 8.3
Gini Coefficient: 0.347

5^th percentile home price: $52,000
95^th percentile home price: $533,000
Ratio (95th/5th): 10.3
Gini Coefficient: 0.349