Love, Money + Real Estate #007
Love, Money + Real Estate #007
MLK Jr., Black v. White Home Buyers, & Money + Credit Resolutions
Dear Friends,
I just got off WGN Radio for my regular weekly hit with John Williams on the Wintrust Business Lunch. We were talking about a new Zillow report that shows Black mortgage applicants were denied 84% more often than White borrowers.
John asked me why that was - or rather, did I expect it since Black families have approximately one-tenth the wealth of White families, Black employees lost their jobs and were harder hit financially during the pandemic than their White counterparts, and had worse credit.
While all of that is true, it doesn’t explain why even more Black families were denied home loans in 2020 vs. 2019 (84% vs. 74%). According to Zillow’s study of Home Mortgage Disclosure Act (HMDA) data, 19.8% of Black applicants were denied a mortgage in 2020, much higher than the 10.7% of White applicants that were denied.
It also doesn’t explain why Black mortgage applicants had the highest denial rates in Mississippi (31% of all applicants), Louisiana (26.1%), Arkansas (26%) and South Carolina (25.8%). And, it doesn’t explain why Black homeownership has declined precipitously since 2012, in the wake of the Great Recession.
“This disproportionate impact of the pandemic on Black households has stalled efforts to close gaps in credit access, homeownership, home values, and mortgage denial rates, making the journey to equity even slower than it already was,” notes Zillow’s blog post.
In today’s world of digital banking (and the promise of color-free access), it may surprise you to learn the following:
Median income of black home buyers: $67,000, compared with $83,000 of all applicants.
Median property value of Black buyers: $225,000 vs. $275,000 of all applicants
Median down payment from a Black buyer: $16,600 less than the overall median down payment.
Black-owned homes are worth 16.7% less than the typical US home (as of October, 2021)
What I do know is that generational wealth is built (to a great extent) on homeownership and on owning assets (or the value of them, if they’re sold) that get passed down from generation to generation. I also know that in 2022, there are still deeds that prohibit homes being sold to Black and Brown people, Asians and Jews. Yes, they’re unenforceable, but noxious all the same.
There is a credit gap and a knowledge gap and both are growing along racial lines. It’s solvable - but it requires everyone’s help. In a world where the five wealthiest billionaires have more money than the poorest 3.1 billion people in the world (it’s enough to pay off everyone’s student loan debt at once), we ought to be able to provide everyone with equal opportunity to build financial stability and generational wealth.
Want to build wealth? Check out this free series
Best Money Moves is proud to be a co-sponsor of Building Wealth: Moving from Fear to Financial Security, an educational series from BlackFem and YWCA Metropolitan Chicago. The three free sessions include to following topics:
Material Safety and Navigating Financial Anxiety | January 18, 12:00 - 1:00 p.m. CT
Building Wealth in the Age of Covid | January 25, 12:00 - 1:00 p.m. CT
Activist Investing. | February 1, 12:00 - 1:00 p.m. CT
Register here and get free access to your own Best Money Moves account.
Real Estate News You Can Use
Ready to move? You’re not alone…
We’re only two weeks into 2022, but Americans are getting itchy about where they live. According to Lending Tree:
40% of Americans are considering a move. Gen Zers want to rent and Millennials want to buy.
Gen Zers and Gen Xers want a happy home for their pets. Millennials want outdoor space and Boomers want covered parking.
Men (44%) want to move more than women (34%). If you do want to move, chances are you’re also thinking about changing jobs.
Beware: You might not find a lot to buy. Redfin reports that the number of new homes for sale fell to a new low in December. Just as interest rates starting climbing. (They’re up 50 basis points, about a half a percent since then).
Popular reads on ThinkGlink.com, BestMoneyMoves.com and LawProblems.com
In the words of Martin Luther King, Jr.:
“Darkness cannot drive out darkness; only light can do that. Hate cannot drive out hate; only love can do that.”
Ilyce
I received this comment from Rick Sharga, SVP RealtyTrac:
Interesting issue.
A partial answer to your question about falling Black homeownership rates since the Great Recession is that Black and Hispanic borrowers were hit disproportionately hard by the foreclosure wave. For borrowers who were either barely able to afford a home - or worse, were given a toxic loan for a home that they simply couldn't afford - the impact of a foreclosure can take many years to overcome, and is probably one of the reasons that Black homeownership rates haven't recovered since then.
While homeownership rates among Black and Hispanic borrowers plummeted as the number of foreclosures rose, Hispanic homeownership rates have risen consistently since then. The same hasn't been true for Black homeownership. I have to believe that someone is researching the reason(s) why the rate of recovery between these two groups has been so disparate, but I haven't seen anything on the subject yet.
This remains one of the lingering and probably harder to solve problems in the housing industry today.