NAR: Despite gains, racial minorities still faced disparities. Black homeownership lagged at 44.1%; rates for Asian (66.3%) and Hispanic Americans (51.1%) were records.

WASHINGTON – Homeownership rates for racial minorities increased in 2022, with Asian and Hispanic Americans achieving historic peaks.

Despite these advancements, disparities persist among racial and ethnic groups, notably with Black homeownership lagging. People of color continue to endure significant buying challenges throughout and after their home purchases, according to a report released today by the National Association of Realtors®.

The 2024 Snapshot of Race and Home Buying in America, delves into homeownership trends within each racial group and explores obstacles encountered in the pursuit of homeownership.

Leveraging NAR’s 2023 Profile of Home Buyers and Sellers data, the report also explores the demographics of home buyers, motivations for purchasing, types of properties acquired and financial profiles – specifically focusing on racial distinctions.

Compared to a decade ago (63.9% in 2012), U.S. homeownership significantly increased (65.2% in 2022), with approximately 10.5 million more homeowners. However, the homeownership rate declined from 2021 (65.4%), influenced mostly by challenging housing affordability and inventory conditions.

Despite fast-rising mortgage rates, minority groups saw increased homeownership rates in 2022. Asian (63.3%) and Hispanic (51.1%) homeownership rates registered all-time highs.

The Black homeownership rate experienced a modest uptick to 44.1%, but remains substantially lower than Asian, Hispanic and White (72.3%) Americans. Since 2012, the homeownership gap between Black and White Americans has widened from 27% to 28%.

“Minority homeownership gained ground this year, with Asian and Hispanic homeownership hitting record highs,” said Jessica Lautz, NAR deputy chief economist and vice president of research. “While the gains should be celebrated, the pathway into homeownership remains arduous for minority buyers.”

Asian Americans (6.1 percentage points or 1.5 million households) and Hispanic Americans (5.4 percentage points or 3.2 million households) experienced the largest homeownership rate gains over the last decade. White American homeownership grew by 3.1 percentage points (65,000 households), maintaining around 70% since 2017.

The data reveal significant disparities in housing affordability for existing homeowners across racial and ethnic groups. In Colorado, 41% of Black homeowners spend more than 30% of their income on housing, compared to 24% of White homeowners. In Hawaii and Iowa, the gap between the share of cost-burdened White and Black homeowners is more than 30 percentage points. In New York, 37% of Hispanic and Asian homeowners spend more than 30% of their income on housing, indicating a considerable affordability challenge, while 25% of White homeowners are cost burdened.

“The impacts of housing affordability and limited inventory are more extreme for minority buyers, because more than half are first-time buyers who must rely on down payment sources beyond gained housing equity,” explained Lautz.

As rental costs escalate, they compress renters’ disposable incomes and directly impact the capacity to accumulate savings for a home down payment. This challenge is acutely amplified among minority groups, which often face additional systemic barriers and disparities in income and wealth, further exacerbating their struggle toward achieving homeownership.

“Potential buyers of color have a harder time saving for a down payment on a home, because they are paying more of their monthly income toward rent,” explained Lautz. “Even among successful home buyers, minorities have a higher amount of student debt – the biggest expense that holds back saving, along with rent. Once they are ready to buy, Hispanic and Black Americans have a higher rate of loan denials in the mortgage market.”

Black home buyers reported the highest share of student loan debt at 41%, with a median amount of $46,000 – a record high. Twenty-nine percent of Hispanic home buyers reported having student loan debt, with a median amount of $33,300.

Black and Hispanic home buyers also encounter additional hurdles in securing mortgages. Black (26%) and Hispanic (22%) applicants experience higher denial rates for mortgage applications compared to their White (16%) and Asian (15%) counterparts, according to data from the Home Mortgage Disclosure Act.

While Black and Hispanic applicants face greater challenges in obtaining a loan, those who manage to secure one often encounter less favorable terms with higher mortgage rates than White and Asian borrowers.

Among loans originated in 2022, 20% of mortgages for Black and 21% for Hispanic borrowers came with mortgage rates exceeding 6%. This contrasts with White (18%) and Asian (15%) borrowers’ mortgages having rates above this threshold.

The average mortgage rates for Black and Hispanic borrowers stood at approximately 4.9%, compared to 4.8% for White and 4.6% for Asian borrowers.

Among all home buyers, White Americans made up the largest share (81%), followed by Hispanic Americans (7%), Black Americans (7%), Asian Americans (6%) and other (6%). Fifty-five percent of Asian and 51% of Black and Hispanic buyers were first-time home buyers.

Twenty-four percent of Black, 23% of Asian and 22% of Hispanic buyers purchased multigenerational homes, compared to only 12% among White buyers.

Twenty-six percent of Asian and 14% of Hispanic buyers used a gift from a relative or friend toward their down payment for their home.

Eighteen percent of Hispanic, 17% of Asian and 16% of Black buyers lived with parents, relatives or friends prior to purchasing their home, compared to only 10% of White buyers.

© 2024 Florida Realtors®

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Author: marlam