In These Cities, the Housing Market Runs on Generational Wealth

Housing wealth is passed from parents to children more effectively than earnings, according to new research published by the National Bureau of Economic Research (NBER). The study, which analyzed data for over 3.4 million families from U.S. Census Bureau, property, and income tax records, indicates a significant shift in understanding upward economic mobility in the United States. Researchers found that housing capital exhibited an intergenerational persistence score of 0.43, surpassing that of total income (0.35) and labor earnings (0.29). This means that children whose parents were in a higher housing wealth bracket were more likely to achieve similar wealth themselves. For instance, children of parents ranking 10 spots higher in housing wealth distribution tended to land approximately 4.3 spots higher in their own generation's housing wealth distribution. The NBER study highlights that this phenomenon is particularly pronounced in the nation's most expensive housing markets, raising concerns about whether housing shortages are limiting opportunities for individuals without inherited wealth. The research also indicates that children's own labor income accounts for only 40% of the link between parental and child housing wealth, with over half of this connection attributed to a direct channel, suggesting that inherited housing assets play a crucial role in intergenerational wealth transfer.