The US cities where the housing market runs on generational wealth

For generations, the promise of upward mobility was simple: Get a good job, save carefully, and buy your way into the middle class.But in many of America’s most expensive housing markets, that ladder is becoming harder to climb, according to new research.The study, published by the National Bureau of Economic Research (NBER), analyzed US Census Bureau, property, and income tax records for more than 3.4 million families.

It found that housing wealth is more tightly passed from parents to children than earnings are, in a significant reframing of upward mobility in the US.“This clarifies how economic mobility really works,” says Jake Krimmel, senior economist at Realtor.com.“It’s not just about income being passed from one generation to the next, or your parents’ income being a predictor of yours.

It’s about the importance of housing wealth as a necessary and sufficient condition for reaching higher rungs on the economic ladder.”Researchers found that housing capital had an intergenerational persistence score of 0.43, compared with 0.35 for total income and 0.29 for labor earnings.Put another way, children whose parents ranked ten spots higher in the housing wealth distribution ended up about 4.3 spots higher in their own generation’s housing wealth distribution.And in some of the country’s most expensive housing markets, that persistence score is even higher—raising questions about whether the housing shortage is also gating opportunities for those without parental wealth behind them.Housing wealth has long been understood as sticky—once a family has it, it tends to stay there—but the study shows just how sticky it’s become.Children’s own labor income explains only 40% of the connection between parents’ housing wealth and their children’s housing wealth.

Meanwhile, more than half of the connection comes through what researchers call a direct channel.Children of parents with more housing wealth tend to end up with more h...