Since the financial crisis, home equity has gone from being America’s biggest driver of (illusory) wealth to one of the biggest sources of economic inequality.

And while the post-crisis recovery has returned the national home price index to its highs from early 2007, most of this rise was generated by a handful of urban markets like New York City and San Francisco, leaving most Americans behind.

To wit: home prices in the 10 most expensive metro areas have risen 63% since 2000, while home prices in the 10 cheapest areas have gained just 3.6%, according to Harvard’s annual State of the Nation’s Housing report. And while nominal prices may have returned to their pre-recession levels, when you adjust for inflation, real prices are as much as 16 percent below past peaks.

Despite seven years of rock-bottom interest rates, valuations in 3 out of 5 metropolitan areas remain below their pre-recession peak. Outside, of a few rich coastal cities, the only advantage that this “housing recovery” has brought is that some homes remain affordable for some Americans. However, thanks to the disproportionate rise in home valuations in certain densely populated areas, the number of Americans paying more than 50% of their income in rent is near a record high.

US house prices rose 5.6 percent in 2016, finally surpassing the high reached nearly a decade earlier. Achieving this milestone reduced the number of homeowners underwater on their mortgages to 3.2 million by year’s end, a remarkable drop from the 12.1 million peak in 2011.But as Bloomberg reports, nationally, just 1 in 3 homes has recovered peak value. Meanwhile, in the country’s most densely-populated markets, housing supplies are incredibly tight following nearly a decade of historically low construction.

The lack of inventory for sale is evident in both the new and existing segments of the market. In 2016, the typical new home for sale was on the market for 3.3 months, well below the 5.1 months averaged since recordkeeping began in 1988. Meanwhile, only 1.65 million existing homes were for sale in 2016, the lowest count in 16 years. And with sales volumes picking up, the inventory represented just 3.6 months of supply, an 11-year low.

Conditions are particularly tight at the lower end of the market, likely reflecting both the slower price recovery in this segment and the fact that fewer entry-level homes are being built. Between 2004 and 2015, completions of smaller single-family homes (under 1,800 square feet) fell from nearly 500,000 units to only 136,000. Similarly, the number of townhouses started in 2016 (98,000) was less than half the number started in 2005.

Renters, it seems, are bearing the brunt of the US housing stock crunch. Despite a relatively strong pickup in multi-family housing, rental markets are tighter than they’ve been in more than 30 years, though there has been some softening on the high end.

According to the Housing Vacancy Survey, the rental vacancy rate fell for the seventh straight year in 2016, dipping to 6.9 percent—its lowest level in more than three decades. MPF Research reports that the vacancy rate for professionally managed apartments was also just 4.4 percent. While some rental markets showed signs of softening in early 2017—most notably in San Francisco and New York—there is generally little indication that increases in supply are outstripping demand.

Meanwhile, the number of Americans exceeding the 30%-of-income “affordability threshold” has declined for five straight years, but while homeowners have enjoyed greater financial freedom, rates for renters have barely budged.

Indeed, 11.1 million renter households were severely cost burdened in 2015, a 3.7 million increase from 2001. By comparison, 7.6 million owners were severely burdened in 2015, up 1.1 million from 2001. The share of renters with severe burdens varies widely across the nation’s 100 largest metros, ranging from a high of 35.4 percent in Miami to a low of 18.4 percent in El Paso. While most common in high-cost markets, renter cost burdens are also widespread in areas with moderate rents but relatively low incomes. Augusta is a case in point, where the severely cost-burdened share of renters was at 30.3 percent in 2015.

In summary, the US housing market's gains since the crisis have disproportionately benefited certain cities, which creates two problems:

Renters in markets that have seen the strongest comebacks are being squeezed as wages fail to keep up with runaway rents; and,

 

Cities in the south and midwest, typically post-industrial towns, are filled with homeowners who might still be struggling with an underwater mortgage, and with only tepid gains in housing prices, many are trapped in their homes.