During the pandemic, Black and Hispanic homeownership rates increased by 2 and 2.5 percentage points, respectively, surpassing the white homeownership rate, which increased just 1 percentage point.
While the historically low mortgage rates enabled high-earning, highly-educated borrowers across all racial and ethnic groups, it was especially instrumental in boosting homeownership rates among Black and Latino households, according to an analysis by Urban Institute.
From 2019 to 2021, the homeownership rate for Black households went up from 42% to 44%; for white households it went up from 72% to 73%; and for Hispanic households it climbed up from 48.1% to 50.6%.
In fact, after experiencing a continuous decline since the Great Recession, the Black homeownership rate finally made gains between 2019 and 2021.
But the current high mortgage rates and inflation threaten to reverse the trend, according to the analysis.
Young, high-earning Black and Latino households buy homes
The share of homebuyers under the age of 45 increased from 51% in 2019 to 55% in 2021, across all racial and ethnic groups. This change was largest for Black homebuyers younger than 45, whose share increased by 5.3 percentage points, compared with a 4 percentage-point increase for Latino homebuyers and a 3.5 percentage point increase for white homebuyers.
Homeownership:How this millennial couple fixed their credit and bought their first home
Homebuyers:Good income to buy a house? You’ll need at least $100,000 in nearly 40% of markets
In general, households with high incomes and high educational attainment were more likely to access homeownership, with the share of loans made to borrowers with annual incomes above $75,000 increasing by nearly 4 percentage points. The growth in the shares of Black and Latino borrowers with incomes above $75,000 outpaced that of white borrowers, but most high-income white households were already homeowners, which partially explains the smaller magnitude of growth, according to the analysis.
“The reason we saw this increase in Black and Hispanic households becoming home buyers is because of a lot pent-up demand. There’s been a huge delay in home ownership among the younger generation. So finally with the rate declined, a lot of people finally, were able to afford to enter into homeownership,” says Jung Choi, a researcher at the Urban Institute. “Among like Black and Latino homebuyers, the competition shifted towards higher income, higher educated population.”
For households with incomes from $100,000 to $149,999, the Asian homeownership rate is 66%, compared with 83% for white households, 68% for Black households, and 67% for Hispanic households. Part of this is due to the fact that white families have a greater ability to help with down payment assistance due to generational wealth.
Black and Hispanic homebuyers saw income increases during the pandemic
Black and Latino homebuyers experienced larger income increases than Black and Latino households as a whole, with the median among Black and Latino homebuyers increasing by about 9% and 7%, respectively.
The shares of Black and Latino homebuyers with a bachelor’s degree or more education also increased more than any other racial or ethnic group between 2019 and 2021, increasing from 36% to 42% for Black homebuyers and from 30% to 37% for Latino homebuyers.
What policymakers can do to help close the racial homeownership gap
Recent surveys indicate that the current mortgage rates, which have doubled since early 2022, have led to slowdown in the rate of growth in Black and Hispanic homeownership rates. (The 2022 American Community Survey and Home Mortgage Disclosure Act data are not yet available).
The first-time homebuyer share in 2022 dropped to 26% from 34% in 2021, and the median age of first-time homebuyers reached 36, an all-time high. The share of Black homebuyers declined by 3 percentage points, and the Latino share increased by 1 percentage point, both substantially lower than the 6 percentage-point increase in the share of white homebuyers.
“There’s a real ability for policies and targeted programs to make home ownership more sustainable, particularly for Black and Latino households during economic downturns and periods of crises that disproportionately affect them,” says Amalie Zinn, a researcher at the Urban Institute.
The Urban Institute suggests the following measures to continue the pandemic homebuying momentum:
- Targeting down payment assistance to first-generation homebuyers
- Implementing special purpose credit programs for borrowers or neighborhoods of color
- Incorporating positive rental payment history in mortgage underwriting would disproportionately help borrowers of color, as they are more likely to be renters and are more likely to have no or low credit scores.
- Targeted mortgage rate buydowns geared toward low-income borrowers could be particularly effective to bring back some of the benefits of historically low interest rates.
Swapna Venugopal Ramaswamy is a housing and economy correspondent for USA TODAY. You can follow her on Twitter @SwapnaVenugopal and sign up for our Daily Money newsletter here.
Story Credit: usatoday.com