During the pandemic, homeownership rates for blacks and Hispanics increased by 2 and 2.5 percentage points, respectively, outpacing the homeownership rate for whites, which only increased by 1 percentage point.
While the historically low mortgage rates enabled high-paying, highly-educated borrowers from all racial and ethnic groups, it particularly helped increase homeownership rates among black and Latino households, according to an analysis by the Urban Institute.
From 2019 to 2021, the homeownership rate for Black households increased from 42% to 44%; for white households, it fell from 72% to 73%; and for Hispanic households, it went from 48.1% to 50.6%.
In fact, after seeing a steady decline since the Great Recession, black homeownership rates finally rose between 2019 and 2021.
But the current high mortgage rates and inflation threaten to reverse the trend, according to the analysis.
Young, high-income black and Latino households are buying homes
The share of buyers 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 under 45, whose share rose 5.3 percentage points, compared to a 4 percentage point increase for Latino homebuyers and an increase of 3.5 percentage points for white homebuyers.
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In general, households with higher incomes and higher levels of education were more likely to become homeowners, with the share of loans granted to borrowers with annual incomes above $75,000 increasing by almost 4 percentage points. Growth in the shares of black and Latino borrowers with incomes over $75,000 outpaced that of white borrowers, but most high-income white households were already homeowners, which partly explains the lower magnitude of growth. according to the analysis.
“The reason we have seen this increase in the number of black and Hispanic households becoming home buyers is due to strong pent-up demand. There has been a huge lag in home ownership among the younger generation. So eventually, with the rate going down, a lot of people were finally able to afford home ownership,” says Jung Choi, a researcher at the Urban Institute. “Among Black and Latino homebuyers, competition has shifted to a higher-income, more educated population.”
For households with incomes between $100,000 and $149,999, the homeownership rate in Asia is 66%, compared to 83% for white households, 68% for black households and 67% for Hispanic households. This is partly because white families have a greater ability to help with down payment assistance due to generational wealth.
Black and Hispanic homebuyers have seen their incomes increase during the pandemic
Black and Latino shoppers saw larger increases in income than Black and Latino households as a whole, with the median among Black and Latino shoppers increasing by about 9% and 7%, respectively.
The share of black and Latino shoppers with a bachelor’s degree or higher also increased more than any other racial or ethnic group between 2019 and 2021, from 36% to 42% for black shoppers and from 30% to 37% for black shoppers. Latin buyers.
What Policymakers Can Do to Help Close the Racial Homeownership Gap
Recent surveys indicate that current mortgage rates, which have doubled since the beginning of 2022, led to a slowdown in the growth rate of black and Hispanic homeownership rates. (Data from the American Community Survey 2022 and the Home Mortgage Disclosure Act are not yet available).
The share of first-time buyers in 2022 dropped to 26% from 34% in 2021, and the median age of first-time buyers reached 36, an all-time high. The share of black homebuyers decreased by 3 percentage points and the share of Latinos increased by 1 percentage point, both significantly lower than the 6 percentage point increase in the share of white homebuyers.
“There is a real capacity for targeted policies and programs to make homeownership more sustainable, especially for Black and Latino households during economic downturns and times of crises that disproportionately affect them,” says Amalie. Zinn, researcher at the Urban Institute.
The Urban Institute proposes the following measures to continue the momentum of buying a house in the event of a pandemic:
- Target down payment assistance to first-generation buyers
- Implement special purpose credit programs for borrowers or neighborhoods of color
- Incorporate positive rental payment history in Underwriting mortgages would disproportionately help borrowers of color, as they are more likely to be renters and are more likely to have zero or poor credit scores.
- Targeted mortgage rate buybacks aimed at low-income borrowers could be particularly effective in bringing back some of the benefits of historically low interest rates.
Swapna Venugopal Ramaswamy is housing and economics correspondent for USA TODAY. You can follow her on Twitter @SwapnaVenugopal and sign up for our Daily Money newsletter here.