Why the Homeownership Rate Is Still Falling for Many People of Color

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Achieving the American dream of homeownership has become a benchmark that many folks use to measure their success. But it isn’t as attainable for many people of color—particularly black Americans—and that’s better or worse depending on where they live.

For example, just 8% of black residents living in Montana and North Dakota owned their home, according to a recent report from the National Association of Realtors®. Mississippi, Wyoming, and South Carolina had the highest homeownership rate for blacks, at 54%, 53%, and 51%, respectively. NAR relied on American Community Survey data from 2018 for homeownership information.

Nationally, black Americans had the lowest homeownership rate of any group, at just 44% in the last quarter of 2019, according to the U.S. Census Bureau. And that percentage has been steadily rising over the past few years. But it’s significantly lower than that for white Americans, who had the highest homeownership rate, at 73.7%. And it’s less than that of other minorities, including Asian Americans, at 57.6%, and Hispanic Americans, at 48.1%.

“For African Americans and Hispanic Americans, it’s particularly difficult to enter the housing market today,” says Jessica Lautz, NAR’s vice president of research.

Blacks in particular often have lower incomes, were hit harder by subprime loans and the most recent foreclosure crisis, and are more likely be rejected for a mortgage. They’re also less likely to have family help with a down payment thanks to racist historic government and other policies that kept many blacks out of the housing market. (Those policies are now illegal.)

“Lost generational wealth has continued to make it difficult for African American buyers,” Lautz says.

The association was able to put together a more detailed portrait of home buyers from a survey it sent to people who purchased properties between July 2018 and June 2019. Nearly 5,900 recent buyers answered the questionnaire.

Black buyers who responded to the NAR survey had a median household income of $75,000 and had about $38,060 of student debt. With the lowest incomes and highest debt loads, they purchased the cheapest homes of any racial group, at a median $228,000. That’s far lower than the median list price of $300,000 in January, according to realtor.com®.

They also had the highest mortgage loan application rejection rate, at 13% (compared with 4% for Asian and Hispanic Americans and 5% of would-be white buyers). While some of this may be due to persistent racial discrimination, the most common reason they were denied was due to having a high debt-to-income ratio. This means they had high amounts of debt compared with their earnings.

“African Americans were more likely to have a higher amount of student debt than white Americans,” says Lautz. Coupled with lower incomes, “it’s likely harder to pay down that debt and save for a home.”

Asian Americans had the highest incomes, a median $111,7000, and purchased the most expensive homes with a median price tag of $435,000. On the low end of the homeownership spectrum, just 21% of Asian American residents of North Dakota were homeowners. But 71% of Asian American residents in South Carolina owned their homes.

White Americans had the second-highest income, at a median $94,500. They bought homes for a median $255,000. They also had high homeownership rates across the 50 states and the District of Columbia. It was highest in Mississippi, at 78%, and Michigan, at 77%, and lowest in Washington, DC, at 49%; Hawaii, at 54%; and California, at 59%.

Hispanic American respondents had a median income of $81,250 and bought residences with a median price of $255,000. They had the lowest homeownership rates in New York, at 26%, and Massachusetts, at 26%, and the highest rates in Wyoming, at 65%, New Mexico, at 63%, and Maine, at 60%.

“There is a higher share of multigenerational buyers in Latino communities,” says Lautz. “You can be pooling incomes and be able to purchase a home that’s a little larger. Or it could be a strain on the household finances because someone cannot work because someone is retired or someone has a [young] child.”

The lower homeownership rate for minorities could hurt their bottom line in the long run.

“They lose access to the financial stability and wealth building that homeownership provides,” says Lautz.

The post Why the Homeownership Rate Is Still Falling for Many People of Color appeared first on Real Estate News & Insights | realtor.com®.

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