It’s harder than ever for low-income families to buy in “high opportunity neighborhoods”

In 2022, the price of the typical home purchased in “high-opportunity” U.S. neighborhoods — where poor children have the best shot at upward mobility — was $470,000. That’s $130,000 more than the typical home in low-opportunity areas, according to a Redfin report. 

Redfin analyzed home sales in 100 of the most populous U.S. metropolitan areas, sorting each neighborhood into one of three tiers—low opportunity, intermediate opportunity and high opportunity. The brokerage defined a high-opportunity neighborhood as “one where children who grew up in low-earning households went on to become higher earning adults than the typical person who grew up in their metro at the same time.”

Redfin found that people in high-opportunity neighborhoods have better chances to attend highly rated schools and to access better professional networking opportunities. Those neighborhoods often feature large numbers of college graduates and low rates of poverty and crime. However, only 13% of homes in high-opportunity neighborhoods are affordable, down from 37% a decade ago, Redfin shows. 

There are a lot of homes for sale in high-opportunity neighborhoods but they are less affordable, especially for people of color

More than a quarter (39.5%) of U.S. homes for sale are located in high-opportunity neighborhoods. However, very few of them are affordable. According to Redfin, only 13% of homes for sale in high-opportunity neighborhoods in 2022 were affordable on their metro area’s median income, compared with 31.7% in low-opportunity neighborhoods. 

Overall, affordability fell across the board due to surging home prices. The median sale price in high-opportunity neighborhoods grew 100% since 2012, while the median sale price in low-opportunity neighborhoods  jumped 174%.

Meanwhile, it remains easier for white families to access these high opportunity areas. Only 4.2% of these homes were affordable for the typical Black household in 2022. The share was nearly five times higher (19.1%) for the typical white household.

The price premium for opportunity is the highest in segregated Midwestern and Southern metros

Detroit shows the highest premium for high opportunity neighborhoods out of all the metros Redfin analyzed. There, the median home sale price in high-opportunity neighborhoods jumped to $240,000 in 2022. That’s up 269% from the $65,00 median sale price in Detroit’s low-opportunity neighborhoods. Memphis, TN, Akron, OH, Milwaukee and Birmingham, AL  followed suit with respective premiums of 187%, 169%, 149% and 143%.

Also noteworthy, many of the metros where high-opportunity neighborhoods carry hefty home-price premiums grapple with relatively high levels of segregation. Milwaukee and Detroit both rank among the five most segregated metros based on 2020 Census data, Memphis and Birmingham are also near the top of the list.