Americans’ Racially Divergent Experiences with Homeownership

A new report out this week by Zillow (in collaboration with the National Urban League) documents ongoing disparities in homeownership rates and experiences for Americans of different racial groups. Shaun Donovan, the U.S. Secretary for Housing and Urban Development, sat down Wednesday for a public conversation with Zillow’s chief economist, Stan Humphries, to discuss the findings. Secretary Donovan noted that while the U.S. has made progress toward more equality in homeownership, there is room for improvement. The report, A House Divided: How Race Colors the Path to Homeownership, documents two overarching themes: first, that Americans of color (particularly black and Hispanic households) have less overall access to homeownership, and second, that they typically realize fewer of the financial benefits associated with owning a home.  

 

Barriers to Becoming a Homeowner 

According to Zillow’s analysis, 73.9 percent of whites own a home, compared to only 60.9 percent of Asians, 50.9 percent of Hispanics, and 46.5 percent of blacks. The report is cautious to note that much of this gap can be explained by disparities that exist before any exposure to the mortgage market, such as in income or creditworthiness – demonstrating how wealth inequality is reinforced and perpetuated through multiple channels. Racial gaps emerge early in the journey to homeownership: the report “found that blacks and Hispanics are less likely to apply for a mortgage to make a home purchase in the first place, and much less likely to be approved for one than whites and Asians.” The mortgage process also takes longer on average for black and Hispanic aspiring homeowners. These types of roadblocks can confound the efforts of hard-working individuals to achieve their dreams of owning a home, closing off potential avenues through which to build wealth down the road.
 

Building Wealth Through Homeownership

Even if a family overcomes the barriers to owning a home, wealth accumulation is not automatic. In fact, the Great Recession and corresponding housing market crash had a particularly devastating impact on wealth, particularly in communities of color where on average more of families’ wealth was held in their home. As Ben Landy points out on The Century Foundation blog, “while housing made up two-thirds of all middle class wealth in the mid-2000s, the wealthiest one percent had about 90 percent of their gross assets in stocks, securities, and other forms of business equity. Middle class families were therefore seven times as exposed to the housing bubble and collapse.” This dynamic helps explain why improving access to homeownership is not inherently a silver bullet strategy to building wealth. The underlying issue here is that owning a home is different than owning just about any other type of asset – in tough times, it’s very difficult to convert housing wealth into liquid assets to help weather a crisis. The rampant foreclosures seen in the wake of the Recession speak to this phenomenon.
 
Patterns of neighborhood racial segregation also appear to play a significant role here: “Home values in neighborhoods with a high black population are still down 23.3%, and in Hispanic neighborhoods values are down 32.6%. By contrast, home values in neighborhoods with high white populations fell 13.4%, and in neighborhoods with high Asian populations values fell 0.6%.” (Keep in mind that neighborhood segregation is very much the norm: in 2010, the average white, black and Hispanic American adult lived in a neighborhood where their race was the plurality. And according to Zillow’s analysis, over 88 percent of white Americans live in ZIP codes where whites are the majority.) Additionally, if communities of color are facing a “forced ceiling on home equity,” any efforts to increase homeownership must prioritize a racially just framework. Aspiring homeowners in the U.S. need meaningful attention to the dynamics of the housing and mortgage market that reinforce inequality, as well as more creativity on how homeownership policy can mitigate risks and have the desired positive effect on racial wealth disparities.
 
Read the Zillow report here or check out coverage of the event on Twitter at #BuildingEquality.