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As Wealth Gap Grew, Investment Income Beneficiaries Shrank in Wake of 2008 Financial Crisis

TUESDAY, FEB 18, 2020

The percentage of Americans who received income from interest, dividends, or rentals fell almost 4 percent over the last decade, according to a Social Explorer analysis of newly released Census Bureau data.

Nearly 28 million households reported earning money from these kinds of investments, according to the 2005-09 American Community Survey. In the wake of the 2008 financial crisis that sparked the worst economic downturn since the Great Depression, the figure fell to 25 million, according to the 2014-18 American Community Survey.

Map of households with investment income by MSA, 2009 and 2018. Click here to explore further.

The figures likely indicate the reduced role of real estate investments in the nation’s economy. The 2008 financial crisis sharply curbed loose credit markets, causing millions of people to lose primary residences and investment real estate to foreclosure, and real estate fell from roughly 9 percent of the gross domestic product in 2006 to barely 6 percent in 2018.

The number of households receiving investment money fell in all 50 states and the District of Columbia during the decade. Among 878 metropolitan and micropolitan statistical areas, the ranks of households earning money from interest, dividends, or rentals fell in 818 of these areas – more than 93 percent of the total.

Only one place in the U.S. reported double-digit growth in investment income during the decade. The Villages, Fla., one of the fastest-growing places in the nation over the last 10 years, showed a 17.2 percent increase in the number of households making money from interest, dividends, or rents. The Villages is home to the largest master-planned, age-restricted community in the U.S. The median age for a resident in The Villages tops 67 years old, almost three decades older than the typical American.

Other places with increases in investment income included Key West, Fla., another retirement haven where 7.9 percent of households reported receiving  non-wage income; Riverton, Wyo., home to Native tribes that have received royalties from oil and gas companies doing business on the Wind River Indian Reservation (7.6 percent); Evanston, Wyo., the beneficiary of a natural gas and oil boom (7.5 percent); and Jackson, Wyo., an outdoor Mecca that’s close to major ski resorts and national parks (7 percent).

Five U.S. micropolitan areas – defined as an urban core with a population of more than 10,000 but fewer than 50,000 people – reported double-digit losses in interest, dividend, or rental income during the decade. The sharpest drop was recorded in Arcadia, Fla., a micro located roughly halfway between Fort Myers and Tampa. The percentage of households with investment income fell 11.2 percent during the decade, even though the number of households increased by 9.5 percent.

The central micro of Manitowoc, Wisc., located on the shore of Lake Michigan, trailed Arcadia slightly; it reported an 11 percent decline in the number of households with interest, dividend, or rental income. Rexburg, Idaho, suffered the third-largest drop (10.4 percent), followed by the North Dakota energy boom towns of Dickinson (10.2 percent) and Williston (10.1 percent). The two North Dakota cities initially benefited from a massive oil boom, but the decrease in royalties may be tied to North Dakota’s preponderance of shale wells, which typically depreciate far faster than conventional oil wells.

Among large metros, the percentage of New York City residents earning money from interest, dividends, or rentals fell 4.5 percent. Households in the Washington, D.C., (5.1 percent decrease) and San Jose (3.2 percent decline) metro areas registered fewer households with investment incomes, even as median household incomes in both places rose to the highest levels in the nation during the decade.

Author: Frank Bass

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