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The current challenges to increasing the homeownership gap

Reflections from National Fair Housing Month

This article is part of our housing market economic update series. At the end of this series, you can join us on May 10 for a Housing Market Update webinar. Bringing together some of the top economists and researchers in housing, this event will provide an in-depth look at their latest insights on the housing market, along with a roundtable discussion on how this information applies to your business. To register for the HW+ event, go here.

April was National Fair Housing Month. As the calendar has turned to May, and the Realtor Legislative Meetings have come to a close, it’s a good time to reflect on research that was released last month and throughout early 2022.

Three recent reports released by the National Association of Realtors (NAR) Research Group were highlighted in talking points for members to use for their Hill visits with members of Congress. These reports highlight the difference home buyers and potential home buyers have when embarking on the buying process. 

While the homeownership rate in the U.S. has increased overall throughout the pandemic, this is not the same for all Americans. The homeownership rate for Black Americans has actually declined between 2010 and 2020 and stands at 43.4%, while the homeownership rate for white Americans is 72.1%. For Asian Americans the rate is 61.7% and for Hispanic Americans it is 51.1%. 

In February, NAR in partnership with Realtor.com released The Double Trouble of the Housing Market report. The report used real time listing data to show the limited housing inventory and the repercussions to home buyers. By using real time inventory data, and stratifying by income, the report highlights that for a household who earns $75,000 to $100,000 they have 411,000 fewer homes available for sale compared to pre-pandemic.

As of February, since 2019, due to limited inventory and the strong demand of buyers, home prices rose nearly 30% and as a result, a typical home is about $80,000 more expensive than pre-pandemic. Home prices in the last few months have continued to increase at a double-digit pace.

Wages for some home shoppers have also increased but not anywhere near the pace of the home prices. The report is stratified by income but also race on a state level. While the report was released in February, a new trouble of the housing market has emerged: the rise in mortgage rates. The triple threat has continued to exacerbate housing affordability especially moderate-income households, first-time buyers, and minority households. 

NAR also released a second report in February: A Snapshot of Race and Home Buying in America. This is the third annual release of the report by NAR. The report is broken into two sections. While it is well documented the homeownership gap by race in the U.S., it is easy to dismiss the issue as a problem “elsewhere”. This report provides critical information on a state level in the very first section: homeownership rate by race, the denial rate of mortgages, and how cost burdened renter households are. 

The second section, shows the experiences of successful home buyers by race. Even among successful home buyers, the mortgage denial rate is significantly higher at 7% for Hispanic and Black households compared to 3-4% for Asian and white home buyers.

The report also provides critical information on how Black households are nearly doubly likely to carry student debt, and hold a higher amount of debt which inhibits the ability to purchase a home. For all minority groups, it is more likely to be a first-time buyer, which makes it more difficult to save for a downpayment, while these buyers would not have the housing equity afforded to and relied upon by white repeat home buyers.  

The third report, released in April — Obstacles to Home Buying — takes a fresh perspective and examines the issue for potential and successful buyers and compares and contrasts their experiences. Lack of affordable housing was the top obstacle hindering buyers of all races. Among white and Asian potential buyers, lack of homes that fit criteria was the second reason. Among Hispanic buyers, difficulty saving for a downpayment was the second obstacle, while Black buyers faced lack of credit or had credit issues. 

The intent of these reports is to assist in advancing minority homeownership and provide Realtors tools to advocate on a local level that highlight the differences. Home buyers today continue to face limited housing inventory of only 2.0 months supply, continual rise in home prices, and now rises in rates.

Twenty-eight percent of the home buying market last month was all-cash buyers, and for every home that went under contract, sellers saw 4.8 offers, with 57% bidding above the listing price. To close the ownership gap, more housing inventory is needed so local communities can help buyers into homes.

As prices and mortgage rates rise, some buyers will move to the sidelines and the housing market will normalize, but those who remain will be at higher incomes and will be able to compete. Unfortunately, that is unlikely to narrow the homeownership gap and will hit minority buyers more than others.

This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.

To contact the editor responsible for this story:
Dr. Jessica Lautz at [email protected].

To contact the editor responsible for this story:
Brena Nath at [email protected]

Dr. Jessica Lautz is vice president of Demographics and Behavioral Insights at the National Association of Realtors. Lautz discusses research findings in major media outlets and international presentations. In 2021, Lautz was named one of HousingWire’s Women of Influence, a list representing 100 of the most influential women in leadership in the housing industry.

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