The Great Recession devastated many American families on many fronts. By some estimates, the median net worth of households in the U.S. fell by 47 percent between 2007 and 2010. While some families have recovered, many have not. 

During this uneven recovery, wealth inequality has also increased. Those wealthy families tend to have their money in stocks, bonds and other investments, while many families with average means spend more of their money on meeting basic needs like food, transportation and housing — particularly housing. And therein lies a major issue that, if left unresolved, will prolong the already slow economic recovery.

For many middle class Americans, wealth is the family home: their home is their largest asset and thus the largest contributor to wealth. The stock market, while volatile, has in large part recovered. For families with sizable stock holdings, their wealth has increased during the recovery. But for those middle class families whose wealth was based largely on the value of their home, their equity is still suffering.

Consider these 2010 data: 

• Wealthiest: For the wealthiest 1 percent of Americans, housing constituted 9.4 percent of their total household assets. They had 25.4 percent of assets in stocks and securities and over 50 percent in business equity or other real estate investments. 
• Well off: The next 19 percent of Americans had 30.1 percent of their assets in housing, with 20.6 percent in pensions and 14.9 percent in stocks. 
• Middle class: The middle 60 percent of Americans — the middle class — had nearly 67 percent of their wealth in their home, 14.2 percent in pensions and just 3.1 percent in stocks. This means that even after the housing crash, housing still made up nearly 70 percent of middle class assets. When housing values plummeted in the recession, so too did middle class wealth. 

During the real estate bubble, pre-recession, real estate values increased 38 percent, while the value of other financial assets remained flat and/or fell. As a result, real estate became a larger part of general household wealth — but that meant that median wealth had further to fall, and did when the housing bubble popped, falling almost 40 percent. 

Adding debt to the equation exacerbates the situation. By some estimates, middle class debt increased between 2001 and 2007 from 41 cents for each dollar of wealth to 61 cents. In 2012, one study showed the top 1 percent of Americans had a debt-to-income ratio of 61 percent. The middle 60 percent of Americans had a debt-to-income ratio of 134.5 percent. The top 1 percent had a debt-to-equity ratio of 3.5 percent. The middle 60 percent had a debt-to-equity ratio of 71.5 percent.
These statistics help explain the widening wealth inequity in America, and much of it has to do with housing. 

The decline in homeownership rates doesn’t help either. For the past 30 years, about two-thirds of Americans have owned their home. But since 2004, homeownership rates have fallen 5 percent. To put that into perspective, according to REAL Trends, this means 6 million more people and families are renting versus owning. Moreover, first-time homebuyers, which typically make up 35 percent of homebuyers, are missing from today’s market. Homeownership rates fell from 69 percent in 2004 to 64.7 percent at --the end of 2013 and are expected to fall even further over the next few years. Homeownership rates have averaged 65.8 percent since 1988.

So, what’s my point? We often discuss the importance of public policy debates that impact the housing and real estate market, directly or indirectly, and why it’s important for REALTORS^® to stay engaged in these debates. These issues include housing affordability — such as the cost to purchase and stay in housing, which includes transactional taxes and fees, but also ongoing costs like property taxes and land use regulations; mortgage underwriting issues; the impact on housing caused by excessive student and other debt; interest rates and the macro-economic influencers on those rates; mortgage securitization and the future of Fannie and Freddie; the jobs market and unemployment; economic development plans or lack thereof; and housing supply and demand in submarkets. 

Many, if not all, of these policies are influenced by laws, regulations and rules made by government officials. These issues and our engagement with them are critically important. But they’re not just important to us. They are important to the recovery and vitality of middle class families in Wisconsin and across the nation. 

As we close the books on 2014 and look ahead to the New Year, let’s keep in mind those families that are caught in the middle and engage these issues not just for ourselves and our business, but for helping to rebuild America’s middle class.