Flourishing housing market? Depends on where you look
Black Americans haven't experienced the same increase in housing values, wealth and ownership that white Americans have during the past decade's economic expansion, when home prices soared 73%, according to Redfin.
In actuality, blacks have only fallen further behind.
Gaps in homeownership rates and wealth between black and white Americans have widened since 2010. Hispanic and Latin Americans also have experienced weaker homeownership rates and had less substantial gains in median net worth than whites, though not as low as for blacks. Of the three racial groups, blacks saw the greatest decline in homeownership to the lowest rate on record of 40.6%. The rate is over 73% for whites.
"With higher unemployment rates and less wealth to begin with, black Americans were less able to buy homes even when prices were at their lowest point, meaning many missed out on opportunities to build wealth and put down roots in their communities through homeownership," Daryl Fairweather, Redfin's chief economist, said in a press release.
"The growing racial homeownership gap has widened the wealth gap, as home equity remains one of the most significant wealth-building tools. And now, with higher home prices and tighter lending standards than before the housing crash of 2008, it's more difficult than ever for minorities to break into the housing market. That's likely to contribute to growing economic inequality in the U.S," Fairweather said.
In neighborhoods where most residents are black, home equity rose by $120,800 between 2012 and 2018. For areas with a majority of white and Hispanic occupants, equity rose $190,935 and $206,000, respectively, over the same period.
Home equity gains experienced in black communities may look significant on a percentage basis at 213%, but it doesn't necessarily mean people of color have benefited, according to Fairweather.
"Home prices in majority-black neighborhoods were substantially lower in 2012 than they were in other communities, meaning there was a huge amount of room for prices to grow. Many of those neighborhoods were ripe for gentrification, with significant demand for affordable homes that pushed up home prices more than in expensive neighborhoods. This likely pushed many black Americans out of those communities and prevented renters from becoming homeowners," Fairweather said.
Blacks may "very well be renting homes from outside investors. And even so, homeowners in majority-black communities still don't have as much cash to show for their investments as homeowners in majority-white communities," he added.
In addition, home equity growth among black Americans didn't result in net worth gains, but rather the opposite.
While the median net worth for white Americans jumped 18.5% to $171,000 in 2016 (the most recent full-year data available), it declined 2.8% for blacks to $17,100. This marks a staggering gap of $153,900 between whites and blacks in America, which is up 22.8% from $125,300 in 2010.
To put this into perspective, a typical down payment needed to afford a median home by an average wage earner in the country is $27,980, which is only over $10,000 more than the entire net worth of a black citizen.
Redfin's report includes an analysis of data from the Federal Reserve, Census Bureau and the Bureau of Labor Statistics.