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The housing market's new pain: Rising inequality

Housing prices in America are on the rebound, lifting the property values of homes from coast to coast.

At least, that's the conventional wisdom. But the reality is far less rosy: The housing market has actually become a tale of two types of cities, with rich and middle-class areas seeing sizable gains, while many poor -- and often minority -- neighborhoods continue to suffer from depressed prices.

About 15 percent of homes under $200,000 were worth less than their mortgages as of March, The Wall Street Journal reports, citing real-estate information firm CoreLogic. But only 6 percent of houses above $200,000 were underwater. The impact of this disparity is disproportionately hurting black families, according to a new report from the ACLU.

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"Without the Great Recession, home equity values for black and white families at the same income and education levels were headed toward parity by 2050," the ACLU said in its report. "As a result of the Great Recession, however, the gap between black and white home equity will likely remain large decades into the future."

It's not only blacks and minorities that are being bypassed by the housing rebound, however. Many low-income neighborhoods and towns that have failed to see wage growth or lower unemployment are also suffering, such as Trenton, New Jersey. The state's capital has an unemployment rate of 8.7 percent, or more than three percentage points higher than the U.S. average. Trenton's median household income is only $36,662, or about one-third lower than the national figure, while about one-quarter of the city lives below the poverty line.

Without a base of workers with steadily growing incomes and strong employment prospects, Trenton has largely missed out on the housing recovery seen in cities such as New York and San Francisco (although those markets have their own issues with valuations). As of last year, Trenton was still dealing with a high number of foreclosures, as well as a 26 percent decline in the number of sold properties, according to NJSpotlight.

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With higher rates of poverty among black and Hispanic families than among whites, it may be no surprise that many cities missing out on the housing recovery also tend to have large minority populations. More than 50 percent of Trenton's 83,000 residents, for instance, are black, according to the Census.

On the other hand, New York City might as well be another planet, even though it's just 90 minutes north of Trenton. The median apartment price in Manhattan reached a record $911,000 last year, nearly the same price as at the 2008 peak. The rising stock market and the growth of Wall Street is helping fuel the boom, as is the influx of foreign buyers seeking footholds in the nation's most populous city.

The dichotomy between Trenton and New York City mirrors the trend in U.S. incomes, with the rich getting richer and the poor, at best, treading water. The income of growth of the top 1 percent of Americans has been meteoric, with high earners now taking home 20 percent of all pretax income in the country, more than double their share in 1980. The remaining 99 percent of Americans saw their incomes rise by an annual growth rate of only 0.6 percent.

For black families, the issues are compounded by predatory loans and having a greater portion of their wealth tied up in home equity, according to the ACLU.

"Blacks were more exposed to predatory loans and other types of toxic mortgages and ballooning interest rates as compared to whites, leading to disparate rates of delinquency and foreclosure," the ACLU said in its report.

Those types of risky loans had a hangover effect on black homeowners even in the recovery. The ACLU found that the home equity values of black homeowners declined by 6 percent from 2009 to 2011, while white homeowners saw a decline of only 2 percent during the same period.

"While white home equity began to recover quickly after the housing crisis stabilized, this was not the case for blacks; again, this difference likely emerges as a result of blacks' disproportionate exposure to predatory loans and other deceptive mortgage schemes," the report noted.

To get black homeowners on better footing, the ACLU recommended several steps, including regulating mortgage servicing and monitoring lending practices to ensure that low-income and minority communities aren't denied mortgages unfairly.

While that might help to some extent, the bigger issue might be the downward spiral that communities face when housing prices continue to drop, prompting some residents to leave in search of greener -- and wealthier -- pastures.