One under-the-radar result of the COVID-19 pandemic’s first few years, according to a panelist at the recent all-virtual National Association of REALTORS®’ (NAR) fourth annual Real Estate Forecast Summit, was the positive effect it had on Black and Latino homeownership.
That viewpoint and many others were expressed during the discussion related to buyer and seller diversity demographics held last week during the summit.
“The pandemic brought a number of unexpected changes to the housing market,” said Vanessa Perry, Ph.D., a nonresident fellow at the Urban Institute and professor of marketing at the George Washington University School of Business. “Despite increases in house prices, during the pandemic, Black and Hispanic homeownership actually increased by 2% to 2.5%, while white homeownership only went up 1.2%. This is especially good news for Black and Hispanic homebuyers, since these households are typically more likely to face layoffs, illnesses and hardships. The numbers are due to the historically low interest rates plus protections by the Federal government to help these families remain stable and maybe even save some money during the pandemic.”
“That’s great news, and something REALTORS® should keep an eye on to help bridge the gap that has been so historically wide, as long as we can keep addressing it as a community,” said panel moderator Jessica Lutz, Ph.D., deputy chief economist and vice president of Research at NAR.
Lutz then asked panelists how the pandemic and housing affordability have shaped the nature of American homes, and what’s here to stay.
“What I see over the last couple of years is the confluence of some long-term trends and short-term impact,” answered Rodney Harrell, Ph.D., vice president of family, home and community for AARP.
“The long-term trends are those demographic-changing ones and the aging of the population, with 10,000 people turning 65 every day, and more people over 65 than under 18 for the first time by 2034. To me, that is emblematic of the long-term shift to making sure we have communities that meet the needs of people of all ages. One thing we’ve found over the last couple of years as people have struggled with COVID is that each death has a family attached that is rethinking their housing situation,” he added.
From there, panelist Daniel McCue—senior research associate at the Harvard Joint Center for Housing Studies—went on to explain how his organization studies shifting trends in housing to make determinations.
“The Joint Center looks a lot at the long-term trends, including what’s behind the surge in housing demand we had throughout the pandemic,” he said. “How could household growth be so high when the news shows headlines saying ‘Population growth hit 100-year lows?’ How can you have surging housing growth and plummeting population growth when those things generally go together?
“The surge in housing growth is huge and real, at twice what it was five years ago. For every new homeowner there was a renter who filled the unit that opened up. And we saw a huge surge in household formation, particularly by millennials. For years and years we were hearing about fewer households being formed, with more than half a million households lost, but then springing back to life through stimulus payments and wage growth at the low and middle incomes. The pandemic showed us that there was a real desire for household formation, but the means to do so didn’t exist until there was some help. We regained a lot of the losses of people living on their own before numbers started tumbling after the recession. We can’t expect that boost in the future. What’s the demand to be going forward? What policies can make things less volatile? What can we do to make the growth as even and as equitable as possible?”
Perry answered, linking the points McCue made with her continued emphasis on the need to help minorities achieve the American Dream of homeownership.
“Unfortunately, the high inflation and housing costs due to interest rates and other trends presently are likely going to prevent further gains in the near term,” she asserted. “Home prices may be slowing down a bit across the country, but are still high. Interest rates have more than doubled in the last year, making homeownership less affordable, particularly for Black and Latino households who have lower incomes and fewer assets to draw on for things like down payments, largely due to historical racism and discrimination. Then inflation and rents make it more difficult to save for down payments. And a full-on recession historically has had more of a negative impact on these households.
“That said, if house prices continue to fall, we could have some good news. A number of lenders are offering special-purpose credit programs which are designed to relax underwriting guidelines for Black and Latino homebuyers who have faced barriers to mortgage credit.”
Harrell was then asked about the AARP Livability Index , which grades neighborhoods and communities across the U.S. based on 60 indicators including transportation, environment, engagement, health and opportunity.
“It was created in 2015,” he said. “REALTORS® can go in with a zip code to see if that area provides what people want. It addresses the information gap that many people have and helps them make more informed housing decisions that work today and tomorrow.”
Finally, Lutz asked each panelist for one thought to help real estate agents in 2023 that also addresses gaps within the community.
Harrell: “Think about the past and future at the same time. Consider that things have built up to the needs people have today, but also that needs change over time, especially as we’re aging, and making sure the options meet those needs.”
Perry: “In every economic cycle there are opportunities. So we should try to think about them under low-interest rate environments and what’s coming next, and higher-interest rate environments and higher prices, and what’s coming next. There are always opportunities.”
McCue: “The surge in household growth and demand over the last few years really shows that there is a thirst for housing. It’s giving people the financial or overall ability to realize that demand is going to be key. If the finances can work, the demand will be shown.”
Stay tuned for more coverage of NAR’s virtual summit.