The racial home ownership gap is wider now than it was a decade ago


While more Americans own homes today than a decade ago, and the rate is increasing across all races, the gap between ownership rates for blacks and any other race or ethnic group is even wider now than it was in 2011, according to a new analysis of the National. Association of Realtors.

By a number of measures, the challenges facing black homebuyers are significant and showing little improvement.

The homeownership rate for white Americans in 2021 was 72.7 percent, but the rate for black Americans was 44 percent, according to NAR’s analysis of the most recent data. The homeownership rate for Asian Americans was 62.8% and for Hispanic Americans it was 50.6%.

All groups tracked in the survey have seen their homeownership rates rise over the past decade, but Black ownership still lags far behind, rising just 0.4 percentage points in a decade, while the rate for Hispanics rose 4 percentage points. units.

Home ownership in the United States hit its lowest point in 2015 and has since grown steadily to 65.5% of Americans owning a home in 2021. More Americans own homes than a decade ago, with about 9.2 million more homeowners today than in 2011.

But Black Americans have seen the smallest share of this growth. This results in what housing advocates and economists call the “racial homeownership gap” between the share of black families who own homes and the share of white families who own homes. That gap is now 29%, compared to 26% in 2011.

Not all buyers have the same view of home ownership or wealth creation prospects in the United States. The reasons include historical biases and redlining practices that continue today. Just this week, the Department of Justice secured a $9 million settlement to resolve allegations that Park National Bank in Ohio engaged in a pattern of discrimination regarding “redlining” mortgage loans in Columbus, Ohio. Redlining is an illegal practice in which lenders avoid providing credit services to people in certain communities because of the race or ethnic origin of the residents there.

But there are other causes, according to the NAR analysis, including high home ownership costs, excessive cost burdens for black homebuyers and additional lending discrimination.

Housing affordability declined in 2022 as mortgage rates doubled from the previous year and house prices hit all-time highs. Buyers must now earn more than $100,000 a year if they want to buy a median-priced home without going over their budget, according to the NAR report.

This higher barrier to entry into homeownership disadvantages black families, who had a typical net worth of $24,000 in 2019, compared to a typical white family with $188,200 — nearly eight times as much.

Buying a home also depends on housing costs where you live and the particular combination of housing costs, job security and wages. The homeownership rate for Black Americans varies from 15% to 55% across the country.

The states with the highest homeownership rates for black Americans were South Carolina at 55%, Delaware at 54% and Mississippi at 54%. In contrast, North Dakota (15%), South Dakota (25%) and Alaska (27%) had the lowest homeownership rates.

Meanwhile, the homeownership rate for White Americans ranged from 50% to 81% across the country.

Almost all home buyers, about 90%, finance the purchase with a mortgage. Black Americans are denied mortgages at a higher rate, with 20 percent of black and 15 percent of Hispanic loan applicants denied mortgages, compared with about 11 percent of white and 10 percent of Asian applicants, according to NAR’s analysis of the Home Mortgage Disclosure Act data.

Looking at black Americans alone, denial rates are on the rise for home improvement loans, with 51 percent denied, according to the report.

Low income appears to be the main reason more black households refused to take out mortgages in these areas. In states with a denial rate higher than 20%, the median income of Black applicants was $59,160 on average. The states with the highest denial rates for Black Americans in 2021 were Mississippi at 29%, Louisiana at 25% and South Carolina at 25%.

In addition, bias in home appraisals can also disadvantage black homebuyers and homeowners.

NAR looked at home appraisal data from the Federal Housing Finance Administration and compared the valuation of homes located in areas with a low level of minority residents and areas that had a high level and found that more homes were undervalued in areas with high levels of minority residents.

In 2021, 23.3% of homes in high-minority areas depreciated, while 13.4% of homes in low-minority areas depreciated. NAR estimated that the median assessed value was 11% lower in areas with more compared to homes in areas with fewer minorities.

Among all races, black homeowners spend more of their income to own their homes, according to the NAR report.

Generally, a common financial rule of thumb is to spend no more than 30% of your income on housing costs. Nearly 30% of Black homeowners fall within this range, representing 2 million families. Only 21% of white homeowners are burdened in this way.

Many black renters trying to become homeowners are also burdened with costs, making it difficult to save for a home. More than half of black renters spend more than 30% of their income on rent. And about 30% of Black renters spend more than 50% of their income on rent, representing nearly 2.5 million households.

By comparison, only 22% of white renters spend more than half of their income on rent. That translates to about 5.1 million white renter households.

According to the report, the driver of black renter households bearing the most costs is that although they have a lower income — typically about 30% lower — than white renters, their monthly rent is not significantly lower than that of white renters.

The median income of black renters was $32,600, compared to $45,310 for white renters in 2021, and the median monthly rent was $1,050 for white households, compared to $855 for black renter households. While rental costs are expected to rise even further in 2023, according to the report, it will be harder for Black renter households to save for a down payment on a home.

With mortgage rates double what they were a year ago, more buyers, including black homebuyers, have been pushed away from home ownership. With average interest rates on a 30-year, fixed-rate loan currently at 6.5%, few renters can currently afford to buy the typical home.

While 17% of white renters can afford to buy the median-priced home, only 9% of black renters can do so nationally, NAR estimates, and concluded that the homeownership gap between white and black households will continue to remain.

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