Black homeownership rate is now lower than it was a decade ago

More Americans own a home now than in any year after the Great Recession, with the homeownership rate in the United States reaching 65.5% in 2020, according to NAR. This represents a 1.3% increase from 2019, the highest annual increase ever.

But black home ownership, at 43.4%, remains lower than it was a decade ago. And that’s nearly 30 percentage points behind the white homeownership rate of 72.1%. Meanwhile, Hispanic homeownership has hit an all-time high, reaching over 50% for the first time, and Asia’s homeownership rate is 61.7%.

“Housing affordability and low inventory have made it even more difficult for all buyers to access homeownership, but even more so for black Americans,” said Jessica Lautz, vice president of demographics and behavioral insights. from NAR.

The disparities highlight the challenges faced by minority homebuyers, Lautz said.

“Today, homeownership is the primary source of wealth creation for most American households,” Marcia L. Fudge, secretary of the Department of Housing and Urban Development, said in a statement. “Unfortunately, the NAR report confirms that Black Americans are being excluded from homeownership opportunities at an even higher rate than a decade ago.”

Secretary Fudge added: “It’s critical that we bridge the racial divide in homeownership with intentional solutions that recognize both the lingering history of discrimination and inequality, and the current crisis of homeownership. housing affordability.

Who can afford to buy

The ability to afford a home has become much more difficult during the pandemic for first-time buyers, NAR found.

Since 2019, home prices have climbed 30%, averaging around $80,000 for a typical home. Meanwhile, housing inventory has shrunk to less than a million units available for sale. And about half of those homes are only affordable for households with at least $100,000 in annual income, according to the report.

While households earning more than $100,000 a year comprise nearly half of all Asian households and 35% of white households, only 25% of Hispanic households earn that much and only 20% of black households.

The states that are most affordable for black households to buy a home include Maryland, West Virginia, Kansas, Ohio and Indiana, according to NAR analysis based on income levels and home availability . The least affordable states for black households are Utah, Oregon, California, Nevada and Rhode Island.

Economic disparities

In addition to buying homes at a lower rate, black and Hispanic homebuyers face serious obstacles on the road to homeownership.

According to NAR, Black and Hispanic Americans report being rejected for mortgages at a higher rate than their White and Asian peers and Black Americans report a higher incidence of discrimination in a real estate transaction.

Black households are also the most likely of all buyer groups to be weighed down by student loan debt, which can prevent potential buyers from saving for a down payment. The 41% of black households with student debt is more than double that of Asian households at 18% and nearly double that of white households at 22%, while 26% of Hispanic households have student debt.

The amount of student debt also tends to be higher for Black Americans, with a median debt balance of $45,000, higher than Hispanic households at $35,500, white households at $30,000 and Asian households at $24,400, according to the report.

Black households also face an inordinate challenge of saving to buy a home as half of Black renter households are cost burdened, spending more than 30% of their income on rent. Additionally, 28% are “heavily cost-burdened” and pay half or more of their income in rent.

“Black households not only spend more of their income on rent, but they’re also more likely to hold student debt and have higher balances,” 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) savings or retirement savings to access homeownership.”

According to NAR, black Americans and Hispanic Americans were at least twice as likely as white Americans to dip into their 401(k) or pension funds as a down payment source for buying a home.

Close the gap

A consortium of housing groups, including NAR, has created the Black Homeownership Collaborative, which aims to increase the number of black households by 3 million by 2030. Recommendations to achieve this include improvements in homeownership advice and l down payment assistance, credit and mortgage products for underserved and excluded populations and increasing the supply of affordable housing.

According to the group, raising black homeownership to that of white Americans would require increasing the number of existing black homeowners by 72%, or about 5 million.

Additionally, HUD created an interagency task force on appraisal industry bias and launched a Homebuyer Assistance Program, which provides funding to states to support sustainable homeownership.

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