Black Americans left behind during pandemic homeownership boom

As a result of record-low mortgage rates and other economic factors, the U.S. homeownership rate increased 1.3 percent year over year to 65.5 percent in 2020 — the largest annual gain ever recorded. While homeownership rates of white Americans (72.1 percent), Asian Americans (61.7 percent) and Hispanic Americans (51.1 percent) reached a 10-year high, Black Americans’ homeownership rate slid 0.8 percent to a new low (43.4 percent).

Dr. Jessica Lautz

“As the gap in homeownership rates for Black and white Americans has widened, it is important to understand the unique challenges that minority home buyers face,” National Association of Realtors Vice President of Demographics and Behavioral Insights Jessica Lautz said of the association’s latest study, published on Wednesday. “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.”

Astronomical housing costs, higher student loan debt loads, lower median wages and discrimination all contribute to Black Americans’ homeownership struggles, the report noted. Approximately half of all homes currently listed for sale (51 percent) are affordable to households with at least $100,000 income; however, only 20 percent of Black households rake in $100,000 or more per year.

Black Americans (41 percent) are more than twice as likely as Asian households (18 percent) and nearly twice as likely as white households (22 percent) to have student loan debt, and have higher median student loan debt ($45,000) than their Hispanic ($35,500), white ($30,000) and Asian ($24,400) counterparts.

The racial wage gap matched with higher student loan debt complicates the home financing process, with aspiring Black homeowners most likely to exhaust their 401K (14 percent) for a down payment and one of the least likely (21 percent) to have proceeds from the sale of their previous residence to finance the purchase of a new abode.

As a result of more acute income and debt challenges, Black and Hispanic borrowers (7 percent each) were more likely to experience mortgage loan application rejections, compared to white and Asian borrowers who experienced rejection rates of 4 percent and 3 percent, respectively.

“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 added. “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.”

Lastly, Black Americans were the most likely to report discrimination issues in the homebuying process. Thirty-two percent of Black homebuyers said they faced stricter requirements because of their race, compared to 19 percent of white homebuyers, 16 percent of Hispanic homebuyers and 4 percent of Asian homebuyers.

NAR said it’s working to close the racial homeownership gap through several initiatives, including participating in the Black Homeownership Collaborative, developing the ACT (Accountability, Culture Change, and Training) Plan to advance fair housing, and launching Fairhaven, a platform that places real estate professionals in simulated situations where discrimination in a real estate transaction can occur.

The organization is also lobbying for multiple policy reforms to improve affordability for all homebuyers, including funding for affordable housing construction; the preservation, expansion and creation of tax incentives to renovate distressed properties; and the conversion of unused commercial space to residential units.

Email Marian McPherson