Housing's racial gap will widen in coronavirus recovery: Redfin
The economic recovery from the coronavirus shutdown will only exacerbate the existing racial divide in the housing market, a Redfin report said.
For the upper end of the market — people in white-collar positions, who have cash on hand and access to credit — the pandemic was merely a pause in the house hunt. The quick bounce-back of the Mortgage Bankers Association's purchase application index was just one sign of that.
"With record-low interest rates and relative job security in spite of the recession, higher-income homebuyers are already coming back into the housing market," Taylor Marr, Redfin lead economist, said in a press release. "Because of this quick bounce-back in home-buying demand, this recession is playing out very differently than the Great Recession, and we're not seeing much impact on home prices so far."
For potential buyers with lower income, it's another story.
The shutdowns had the largest impact on those who work in sectors that typically pay out low wages, such as service and hospitality. Black and Latino people who make up a large part of that workforce had been priced out of the housing market even before the pandemic.
The record levels of unemployment continue to hit the lowest earners the hardest.
The Federal Reserve's May employment survey found that while over one-third of U.S. households had an annual salary of $60,000 or less, the unemployment rate for this group was 21%. For those with income of $100,000 or more, it was just 10%.
Redfin then cross-referenced this data with the Bureau of Labor Statistics monthly report, which broke down unemployment data by race.
For whites, May's unemployment rate was 10.7% — below the overall rate of 13.3%. For Blacks, the rate was 16.8%. Redfin noted that the six percentage point gap compared with whites was twice as high as the normal three percentage point gap. For Asians, unemployment was at 15% and Hispanics it was 17.2%.
But the saying "all real estate is local" rings true when taking a closer look at the data. Take the example of Detroit, which had the second highest unemployment rate in April. The city had the largest increase in demand comparing the week of May 31 to the week of March 1, according to Redfin.
"People who are still employed and confident in their continued employment still really want to buy," said Tony Orlando, a Redfin agent in Detroit. "Buyer demand is insane here, and nearly every home is a multiple offer situation."
Redfin's demand index for Detroit rose by 58% even as April's local unemployment rate was 24.4%. Since real estate was not deemed essential in Detroit, the city saw a drop in activity during the pandemic, Redfin said.
The metro with the highest unemployment rate in April at 33.5%, Las Vegas, had the fifth largest rebound in demand at 25%.
Meanwhile, the market with the lowest unemployment rate in April, Minneapolis, with a rate of 9.9%, only had a 7% increase in demand during Redfin's timeframe. Minneapolis is the epicenter of the protests following the death of George Floyd at the hands of a local police officer.
Meanwhile, the nation's capital, Washington, which had the second lowest unemployment rate (9.9%), actually had a 1% decline in demand.
In Phoenix, demand was unchanged, even though it had the fifth lowest unemployment rate among the cities listed at 12.3%.