The study found a gap between Black and white homeownership rates of about 30% (60.8% for whites, 42% for Blacks). Blacks are rejected for mortgages 2.5 times more than whites (10% vs. 4%) and carry higher student loan debt (43% vs. 21% for whites). NAR calls for policy changes.
WASHINGTON – The National Association of Realtors® (NAR) released a study on minority homeownership in the United States, finding that it “stubbornly lags behind the national rate, with Black Americans facing some of the toughest hurdles to achieving this essential part of the American Dream.”
NAR’s Snapshot of Race & Home Buying in America examines the homeownership rate by race in 2019 using American Community Survey data by state and the changes in the homeownership rate by race from 2009 to 2019. Using its own Profile of Home Buyers and Sellers data from 2020, the report looks into the characteristics of homebuyers – why they purchase, what they purchase, and the financial background for buyers based on race.
“This data reinforces the need to implement key policy initiatives NAR developed in concert with the Urban Institute and the National Association of Real Estate Brokers to address the Black homeownership gap,” says NAR President Charlie Oppler. “Specifically, this five-point plan developed in 2019 calls on the nation to: advance policy solutions at the local level; tackle housing supply constraints and affordability; promote an equitable and accessible housing finance system; provide further outreach and counseling initiatives for renters and mortgage-ready millennials; and focus on sustainable homeownership and preservation initiatives.”
Nationwide, 43% of Black households can afford to buy the typical home compared to 63% of white households. A higher percentage of Asians (71%) can afford the typical home, while fewer Hispanic households (54%) can do so, the study found.
However, affordability varies widely by state and neighborhood:
- More than 60% of Black households can afford a home in Alaska, Kansas, Nebraska, South Dakota and Vermont.
- Less than a third of Black households can afford a home in California, Colorado, Hawaii, Massachusetts, Montana, Nevada, Oregon, Utah, Washington state, Wyoming and the District of Columbia.
- In only four states can less than 50% of all white households not afford a home: California, Hawaii, Oregon and Washington state.
- More than half of Asian households can afford a home in all but six states: California, Colorado, Hawaii, Montana, North Dakota and Wyoming, plus the District of Columbia.
Nearly one in four Asian Americans (23%) and one in five Hispanic Americans (18%) purchased a multi-generational home, with “spending time with aging parents” and “saving money” listed as the primary reasons for those decisions.
Fewer Black Americans (15%) and white Americans (10%) bought multi-generational homes, but both said their top reason was to accommodate adult children or relatives moving back into the home. However, Black and Asian Americans were more likely to cite “wanting a larger home that multiple incomes could afford together” as an important reason too.
Student loan debt
Black households are more than twice as likely than white households to have student loan debt – 43% vs. 21%. The Black household’s median student is $40,000; the white household’s is $30,000.
Student debt is one of the major hurdles in saving for a down payment.
Lenders rejected Black applicants for mortgage loans at a rate 2.5 times greater than white applicants – 10% vs. 4%, respectively.
Minorities were also more likely to tap into 401(k) retirement funds for a down payment. Black Americans (15%) and Hispanic Americans (10%) were more likely to use 401(k) retirement money than white (5%) and Asian Americans (5%). Using retirement money early can negatively impact future wealth growth and savings attainment.
Conversely, 37% of white Americans used funds from the sale of a primary residence as a down payment for another home, compared to 21% of Hispanic, 18% of Asian and 17% of Black Americans.
“The residential housing market’s strong performance during the pandemic helped homeowners enjoy a significant increase in wealth via approximately $1 trillion in additional home equity over the last year,” says NAR Chief Economist Lawrence Yun. “However, as indicative of the K-shaped economic recovery, greater numbers of potential first-time homebuyers – many of whom are minorities – are feeling discouraged by disproportionate job losses. Essentially, they’re being priced out of owning a home because of rapidly rising home prices resulting from historically low housing inventory.
“For Black Americans, in general, the greater likelihood of having student loan debt, combined with lower household incomes and accrued savings when compared to the national average, adds to the challenge.”
Discrimination during a home sale
When recent home buyers were asked whether they experienced discrimination in a real estate transaction:
- 7% of Black/African-American said they did based on race
- 5% of Asian/Pacific Islanders said they did based on race
- 1% Hispanic/Latino said they did based on race
- 3% of Black/African-American said they did based on color
- 2% of Asian/Pacific Islanders said they did based on color
Many who did not experience discrimination during their transaction still believe it exists:
- 45% of Black/African-Americans
- 35% of Asian/Pacific Islanders
- 32% of Hispanic/Latinos
- 26% of White/Caucasians
Approximately 7 in 10 white Americans said they purchased a home in a neighborhood where the majority of the residents were of the same race. However, only about a quarter of Black, Hispanic and Asian Americans said the same.
NAR says the association believes policy proposals such as the Biden administration’s first-time buyer tax credit of up to $15,000 would help address many of the underlying problems. Under the proposal, homebuyers would receive the tax credit when making the purchase, rather than having to wait until filing federal income taxes the following year.
NAR also believes the first-time buyer tax credit should be accompanied with incentives to create more affordable housing units to prevent the credit from further aggravating the current shortage.
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