The U.S. homeownership rate grew a record 1.3% in 2020 – to 65.5%. It also grew over 10 years for all groups but one: The Black rate dropped to 43.4% from 2010’s 44.2%.
CHICAGO – Black Americans continue to face significant obstacles along the path to homeownership, according to the National Association of Realtors® (NAR) latest housing study, a Snapshot of Race & Home Buying in America.
The study found that the homeownership rate for Black Americans – 43.4% – has fallen compared to 10 years earlier (44.2% in 2010). Conversely, white Americans (72.1%), Asian Americans (61.7%) and Hispanic Americans (51.1%) all achieved decadelong homeownership highs in 2020.
The overall U.S. homeownership rate climbed to 65.5% in 2020, up 1.3% from 2019 and the largest annual increase on record. More Americans are likely to own a home now than during any year following the Great Recession (65.4% homeownership rate in 2010).
NAR’s 2022 Snapshot of Race and Home Buying in America report examined homeownership trends and challenges by race and location to explain current racial disparities in the housing market. Using data from the 2021 Profile of Home Buyers and Sellers, the report looked at the characteristics of the people who purchase homes, why they purchase, what they purchase and the financial background of buyers based on race.
“As the gap in homeownership rates for Black and white Americans has widened, it is important to understand the unique challenges that minority homebuyers face,” says Jessica Lautz, NAR vice president of demographics and behavioral insights. “Housing affordability and low inventory has made it even more challenging for all buyers to enter into homeownership, but even more so for Black Americans.”
Housing affordability has eroded for many consumers since the start of the pandemic due to the combination of record-high home prices and record-low inventory. Since 2019, home prices have spiked 30% – about $80,000 for a typical home – while housing inventory declined to under one million units available for sale. Approximately half of all homes currently listed for sale (51%) are affordable to households with at least $100,000 income.
Nationwide, nearly half of all Asian households annually earn more than $100,000. However, 35% of white households, 25% of Hispanic households and only 20% of Black households have incomes greater than $100,000.
In terms of renter households, half of Black Americans spend more than 30% of their monthly income on rent. Almost three out of 10 Black renter households (28%) and one in five white renter households (20%) are severely cost-burdened, defined in the study as spending more than 50% of their monthly income on rent.
Nationwide, NAR estimates that 47% of white renter households and 36% of Black renter households can afford to buy a typical home when comparing the qualifying income to purchase a home and the median income of renter households.
Student loan debt
“Black households not only spend a bigger portion of their income on rent, but they are also more likely to hold student debt and have higher balances,” Lautz says. “This makes it difficult for Black households to save for a down payment and, as a result, they often use their 401(k) or retirement savings to enter homeownership.”
Black households (41%) are more than twice as likely as Asian households (18%) and nearly twice as likely as white households (22%) to have student loan debt. Approximately a quarter of Hispanic households (26%) reported having student loan debt. The median student loan debt for Black households ($45,000) exceeded that of Hispanic ($35,500), white ($30,000) and Asian ($24,400) households.
Student debt is often a major impediment for prospective homebuyers in saving for a down payment. Black and Hispanic applicants (7% each) were rejected for mortgage loans at greater rates than White and Asian applicants – 4% and 3%, respectively.
Funding a down payment
Black Americans (14%) and Hispanic Americans (12%) were at least twice as likely as white Americans (6%) to tap into their 401(k) or pension funds as a down payment source for a home purchase. Such actions can diminish future wealth growth.
Conversely, almost four out of 10 white Americans (38%) used the funds from the sale of their primary residence to serve as a down payment for a home, compared to only 25% of Hispanic, 21% of Black and 16% of Asian Americans.
Discrimination experience of buyers and sellers
Study participants were asked if they witnessed or experienced discrimination in a real estate transaction. Nearly a third of Black respondents (32%) said they did, facing stricter requirements because of their race, compared to 19% of white respondents, 16% of Hispanic respondents and 4% of Asian respondents.
About one-third of Black and white homebuyers (32% each) and almost a quarter of Hispanic homebuyers (23%) said they witnessed or experienced discrimination with the type of loan product offered.
Approximately seven in 10 white Americans (69%) purchased a home in a neighborhood where the majority of the residents were of the same race. However, about a quarter of Hispanic Americans (26%) and less than a fifth of Black (17%) and Asian Americans (15%) said the same.
© 2022 Florida Realtors®
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