Real Estate’s Role in the Growing Gap between the Rich and the Poor

by on General

Elections Concept

Election Day 2012 is less than a month away and talking points include everything from job creation and federal spending to healthcare and taxes. Each of these things is definitely important and should be addressed; however, other issues are still being pushed under the table.

For example, many people believe these presidential candidates should be focusing more on the real estate real estate market; however, this is one area that both have essentially avoided discussing much over the last few months. Nevertheless, with reports of the widening economic gap between the rich and the poor, maybe these candidates should pay more attention to real estate and its role in this growing gap.

Income Gap Represents Growing Divide

When looking at the gap between the rich and the poor, the most obvious thing to examine is the income gap, which is definitely rising. In fact, in New York City approximately 21% of residents live in poverty. From 2010 to 2011, median income for those considered poor dropped by $463 to $8,844 while the rich increased their income by an average of about $1,919 to $223,285.

Overall, the income of the top 1% in the United States increased 5.5% last year while the income of those in the bottom 80% fell 1.7%. These numbers indicate that the rich truly are getting richer while the poor is getting poorer.

How Real Estate Impacts Wealth

Along with the income gap, it is also important to understand the role that real estate plays in the gap between the rich and the poor, which all boils down to net worth and job creation.

Net worth has been negatively impacted for the middle class because a large portion of most Americans’ net worth is tied up in real estate—in the homes that they own. Therefore, when prices dropped and many people lost their homes to foreclosure, the middle class’s net worth dropped as well.

On the other hand, those with higher incomes have not been as negatively impacted by falling real estate prices. Why? Those with higher income tend to get their net worth from investments—not just real estate.

Moving forward, though, real estate investment gives middle-class Americans a greater opportunity to grow their net worth as home prices start to increase. While rising home prices may not affect the income gap, it can help many American families financially by increasing their net worth.

Furthermore, a rise in new home construction and renovation also has the potential to help close the income gap because this increased level of activity creates jobs for middle-class Americans and provides a stimulus for the economy.

Therefore, there is a significant connection between the real estate market and the growing gap between the rich and the poor; as a result, the presidential candidates need to pay more attention to real estate when addressing these matters.

It is clear that both presidential candidates understand that the gap between the rich and the poor is a huge talking point for the upcoming election; however, they both promise to minimize the gap while claiming that their opponent’s plans will increase the gap.

At the end of the day, these issues have yet to be fully addressed by either presidential candidate despite the role that real estate plays not only in decreasing the gap between the rich and the poor but in overall economic stability and prosperity.