NAR Finds Black Homeownership Remains Lower Than a Decade Ago

According to the National Association of REALTORS®, the U.S. homeownership rate climbed to 65.5 percent in 2020, up just one percent from 2019 and the largest annual increase on record.

While the numbers show that more Americans are likely to own a home now than during any year since the Great Recession, NAR’s 2022 Snapshot of Race and Home Buying in America found that black Americans continue to face hurdles in their homeownership journey.

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 the characteristics of “who purchases homes, why they purchase, what they purchase and the financial background for buyers based on race.”

A look at the numbers

In a 2019 article by Forbes, author John Wake wrote about the “Black Homeownership Paradox,” finding that, according to U.S. Census data, “the percentage of U.S. blacks who own their own homes today is essentially the same as when housing discrimination was outlawed in 1968.” The 1970 census reported that 42 percent of black households owned their own homes, while in 2017, the number was 41 percent.

Fast forward to 2020, and NAR found that the homeownership rate for black Americans was 43.4 percent, just a small percentage higher than the 1970 census number. Conversely, NAR reports that “white Americans (72.1 percent), Asian Americans (61.7 percent) and Hispanic Americans (51.1 percent) all achieved decade long highs in homeownership in 2020, with the rate for Hispanic Americans setting a record and reaching above 50 percent for the first time.”

At the state level, NAR found that the homeownership rate for black Americans in Michigan was 42 percent in 2020, compared to higher rates for Hispanic American (61 percent), Asian Americans (62 percent), and white Americans (80 percent).

Understanding the challenges

In a press release issued by NAR, Jessica Lautz, vice president of demographics and behavioral insights said, "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. 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."

Since the start of the pandemic, record-high home prices and unprecedented low inventory have dramatically affected housing affordability for all consumers. According to NAR, since 2019, “home prices have spiked 30 percent – or about $80,000 for a typical home, while housing inventory has declined to under one million units available for sale.”

The Association reports that approximately half of all homes currently listed for sale (51 percent) are affordable to households with at least $100,000 income. While nearly half of all Asian American households earn more than $100,000 annually, only 35 percent of white households, 25 percent of Hispanic households, and 20 percent of black households have incomes greater than $100,000.

Looking at the rental market, NAR found that half of black Americans spend more than 30 percent of their monthly income on rent and almost three out of 10 black renter households (28 percent) and one in five white renter households (20 percent) are severely cost-burdened — meaning they spend more than 50 percent 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 enter homeownership."

In addition to affordability, data shows that black and Hispanic home buyers also face additional challenges in securing 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 with about 4 percent of white and three percent of Asian applicants.” While the main reason for denial is debt-to-income ratio, black and Hispanic home buyers reported that they also had a low credit score.

NAR says in the states with high concentrations of black households, “the denial rate is disproportionately high for black homeowners and buyers.” Low income seems to be the main reason that more black households were denied mortgages in these areas, and NAR says that “Specifically, in the top 10 states with the highest denial rates, the median income of black applicants was $62,990 on average.”

Michigan is listed as one of the states with the highest mortgage denial rates for black households at 27 percent, compared to 12 percent for White households.

NAR’s study notes that for those who said they witnessed or experienced discrimination in a real estate transaction, “nearly a third of black respondents (32 percent) said they faced stricter requirements because of their race.” And “approximately one-third of black and white home buyers (32 percent each) and almost a quarter of Hispanic home buyers (23 percent) said they witnessed or experienced discrimination with the type of loan product offered.”

Working towards a solution

NAR, along with help from local associations, including the Michigan Realtors® and the Greater Lansing Association of REALTORS® (GLAR), is working to ensure that REALTORS® are active leaders in the fight to close the racial homeownership gap. In fact, NAR serves on the steering committee of the Black Homeownership Collaborative, “whose seven-point plan aims to increase black homeownership by a net 3 million by 2030.”

NAR also stepped-up efforts to end bias 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.

For more real estate news and information be sure to follow GLAR on Facebook and visit the website at www.lansing-realestate.com.

This article originally appeared on Lansing State Journal: NAR Finds Black Homeownership Remains Lower Than a Decade Ago