NAR finds Black home ownership remains lower than a decade ago
According to the National Association of REALTORS®, the homeownership rate in the United States rose to 65.5% in 2020, up just 1% from 2019 and the largest annual increase on record .
While figures show more Americans are likely to own homes now than in any year since the Great Recession, NAR’s 2022 snapshot of race and home buying in America revealed that black Americans continue to face obstacles in their journey to homeownership.
NAR’s report “examines homeownership trends and challenges by race and location to explain current racial disparities in the housing market.” The Association used data from its 2021 Profile of Home Buyers and Sellers to examine characteristics of “who is buying homes, why they are buying, what they are buying and buyers’ financial backgrounds based on race.” .
A look at the numbers
In a 2019 Forbes article, author John Wake wrote about the “black homeownership paradox,” finding that, according to U.S. Census data, “the percentage of black Americans who own their own homes today today is essentially the same as when housing discrimination was prohibited. in 1968.” The 1970 census reported that 42% of black households owned their own home, while in 2017 that number was 41%.
Fast forward to 2020, and NAR found that the homeownership rate for black Americans was 43.4%, just a small percentage higher than the 1970 census figure. Conversely, NAR reports that “white Americans (72.1%), Asian Americans (61.7%) and Hispanic Americans (51.1%) all hit decade highs in homeownership in 2020, the rate of Hispanic Americans setting a record and reaching over 50% for the first time.”
At the state level, NAR found that the homeownership rate for Black Americans in Michigan was 42% in 2020, compared to higher rates for Hispanic Americans (61%), Americans Asian (62%) and White American (80%).
Understand the challenges
In a press release issued by NAR, Jessica Lautz, Vice President of Demographics and Behavioral Insights, said, “As the gap between homeownership rates for black and white Americans has widened dug, it’s important to understand the unique challenges faced by buyers of minority-owned homes Housing affordability and low inventory have made it even more difficult for all buyers to access property, but even more so for black Americans.”
Since the start of the pandemic, record house prices and unprecedented low inventories have significantly affected housing affordability for all consumers. According to NAR, since 2019, “home prices have soared 30% – or around $80,000 for a typical home, while housing inventory has shrunk to less than a million units available for sale” .
The Association reports that about half of all homes currently listed for sale (51%) are affordable for households with an income of at least $100,000. While nearly half of all Asian American households earn more than $100,000 a year, only 35% of white households, 25% of Hispanic households, and 20% of black households have incomes above $100,000. .
Looking at the rental market, NAR found that half of black Americans spend more than 30% of their monthly income on rent and nearly three in 10 black renter households (28%) and one in five white renter households (20 %) are severely cost-burdened – meaning they spend more than 50% of their monthly income on rent.
Lautz said, “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 access homeownership.”
In addition to affordability, data shows that Black and Hispanic homebuyers also face additional challenges obtaining a mortgage. According to NAR’s 2021 Profile of Home Buyers and Sellers, “seven percent of Black and Hispanic home buyers were denied mortgages, compared to about 4% of white applicants and 3% of Asian applicants.” While the main reason for denial is the debt-to-income ratio, black and Hispanic homebuyers said they also had low credit scores.
NAR says that in states with high concentrations of black households, “the rejection rate is disproportionately high for black homeowners and buyers.” Low income appears to be the primary reason more black households have been denied mortgages in these areas, and NAR reports that “specifically, in the 10 states with the highest denial rates, the median income of black candidates was $62,990 on average”.
Michigan is listed as one of the states with the highest mortgage denial rates for black households at 27%, compared to 12% for white households.
The NAR study notes that for those who said they had witnessed or experienced discrimination in a real estate transaction, “nearly a third of Black respondents (32%) said they faced more stringent demands in because of their race”. And “about a third of black-and-white homebuyers (32% each) and nearly a quarter of Hispanic homebuyers (23%) said they had witnessed or experienced discrimination with the type of loan product offered. “.
Towards a solution
NAR, with the help of local associations, including Michigan Realtors® and the Greater Lansing Association of REALTORS® (GLAR), works to ensure REALTORS® are active leaders in the fight to close the gap racial ownership. In fact, NAR sits on the steering committee of the Black Homeownership Collaborative, “whose seven-point plan aims to increase the number of black homeowners by 3 million net by 2030.”
NAR has also stepped up its efforts to end prejudice and discrimination in the industry with its “ACT” plan, which emphasizes “accountability, culture change and training” to advance fair housing. . And NAR’s interactive training platform, Fairhaven, puts real estate professionals in simulated situations where discrimination in a real estate transaction can occur.
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