The real estate market experienced a banner year in 2021, which ended with more Americans achieving homeownership than in any year since the Great Recession, according to a new report by the National Association of REALTORS® (NAR). Despite the milestone, the same report indicated that the “American Dream” path became more challenging for people of color.
NAR’s 2022 Snapshot of Race and Homebuying in America found that the national homeownership rate climbed to 65.5% in 2020—a decade-long high. However, the report indicates that while most race groups saw an uptick in homeownership, Black Americans declined during the same period.
“As the gap in homeownership rates for Black and White Americans has widened, it is important to understand the unique challenges that minority homebuyers face,” said Jessica Lautz, NAR vice president of demographics and behavioral insights. “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.”
Homeownership among Black Americans hit 43.4% in 2020, down from 44.2% in 2010. Southern states dominated the list of areas where Black homeownership was most prominent, with Mississippi, South Carolina and Alabama representing the top three.
The homeownership rates for Asian Americans and Hispanic Americans are 61.7% and 51.1%, respectively. Hispanic American homeownership is at an all-time high and above 50% for the first time.
“Not all families have the same opportunities to homeownership, with many of them facing more constraints in their effort to achieve the American Dream,” read an excerpt from the report, which delved into homeownership trends among each race and hurdles that each group faces on the path to buying a home.
Disparities in mortgage lending were a significant factor contributing to the widening homeownership gap between households. The report noted that 7% of Black and Hispanic mortgage applicants were denied compared to 4% of White and 3% of Asian applicants.
Denial rates for Black Americans appeared to climb higher for home purchase loans, according to the Home Mortgage Disclosure Act (HMDA), which NAR cited in its report.
Based on the HMDA data, nearly 27% of the loan applications for a home purchase were denied compared to 20%, which is the denial rate for refinancing.
While the main reason the mortgage lender rejected their application is the debt-to-income ratio, Black and Hispanic respondents indicated that they also had a low credit score in the report.
Record-high home prices coupled with a record-low inventory exacerbated the erosion of housing affordability since the start of the pandemic in 2020, squeezing many consumers, including Black Americans, out of the market.
Home prices spiked by about $80,000 for a typical home since 2019, while housing supply constraints became even more prominent at the same time, falling under one million units for sale. The report indicated that 51% are affordable to households with at least $100,000 income of the homes listed.
Nearly half of all Asian households annually earn more than $100,000, while 35% of White households, 25% of Hispanic households, and 20% of Black households hit the same mark nationwide.
The affordability squeeze was also prominent among renter households, as NAR noted that one in two Black renters—2.3 million homes—spend more than 30% of their income on rent.
Almost three out of 10 Black renter households and one in five White renter households are spending more than half of their monthly income on rent, which NAR deemed “severely cost-burdened.”
Persisting challenges with student loan debt haven’t helped the situation either.
NAR noted that African American buyers reported the highest share of student loan debt at 41%, with a median amount of $45,000, according to data from NAR’s 2021 Profile of Home Buyers and Sellers, which the association also cited in its new analysis.
Hispanic homebuyers reported a median student loan debt amount at $35,500, with 26% saying they had student loan debt. White/Caucasian buyers came in after that with a $30,000 in reported student loan debt, while Asian/Pacific Islander buyers had the highest share of buyers with at least some college education.
“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 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.”
To read the entire report, click here.
For more information, please visit www.nar.realtor.
Jordan Grice is RISMedia’s associate online editor. Email him your real estate news to jgrice@rismedia.com.
