New Studies See Challenges, Reasons For Optimism About Black Real Estate Wealth

Just 54 years ago, the Fair Housing Act was signed, actively outlawing housing discrimination on the basis of race, color and national origin. However, a decades-old housing policy known as redlining has had a long-lasting effect on American society and the economic health of Black households in particular.

Recently, additional government protections, social justice movements and an overall increase in wealth have pushed the housing market in the right direction, though there is still much to be done.

As the celebration of Black History Month continues, new research by Realtor.com and Redfin spotlights Black home buyers’ struggles and reasons for optimism about Black homeownership. 

“Black Americans face significantly more obstacles when it comes to realizing the American dream of homeownership, from mortgage denials to low property appraisals and much more,” said George Ratiu, manager of economic research at Realtor.com. “As a result, the Black homeownership rate currently remains the lowest in the country, underscoring how the challenging Covid housing market has compounded long-standing systemic issues faced by today’s Black buyers.” 

He said Realtor.com’s survey data also highlights a gap in Black buyers’ access to critical resources for competing in today’s fast-moving market.

“Compared to overall respondents, fewer Black buyers had gotten pre-approved for a mortgage and contacted an agent,” said Ratiu. “These trends illustrate the importance of providing fair housing resources and guidance through initiatives like the Realtor.com For Everyone microsite. Black Americans play an increasingly key role in the housing market. Closing the racial homeownership gap should be a top priority across the real estate ecosystem, and there’s much work left to be done.”

U.S. racial homeownership gap widens as Black Millennial and female buyers gain ground

Black Americans’ share of all October 2020 to September 2021 home buyers was only slightly higher than 10 years ago (+0.2 percentage points), according to Realtor.com.

Black home buyers grew at a similar pace as their non-Black peers in recent years until spring 2021, when the average annual rate for Black buyers was 4.5 percentage points lower than other racial and ethnic groups.  

On average, growth of female Black home buyers consistently outpaced (+10.4% year-over-year) their male counterparts from October 2018 to September 2021.

Among all generations of Black buyers during the entire study period (October 2018 to September 2021), Millennials had the fastest average growth rate (+13.8% year-over-year).

Some Black home buyers have been successful during the pandemic

Black Americans accounted for 20% of surveyed respondents who became homeowners between September 2020-2021, which was a higher rate than their white peers (16%), according to Realtor.com.

At the same time, the share of prospective 2022 buyers who tried to find a home in 2021 and were unsuccessful was higher among Black buyers (19%) than the overall rate (15%).

Among those who planned to buy in 2022, Black Americans’ top reasons for waiting include needing more time to save for a down payment (at 22% versus 18% overall) and concerns about managing logistics (at 19% versus 15% overall).

Black buyers – including many first-timers – aspire toward homeownership but cite affordability challenges

When asked by Realtor.com about their reasons for purchasing a home within the next 12 months, surveyed Black Americans’ top motivating factors were realizing the dream of homeownership and needing more space for their family, each at 24%.

First-timers account for 31% of surveyed Black Americans who plan to buy within the next year – 2.6x the overall share (12%).

Affordability is a key challenge for prospective Black buyers, with 17% looking to buy a home priced at $100,000 or less, versus 10% of overall respondents.

While remote work has enabled some home shoppers to explore lower-priced housing markets further from city centers, the rate of Black buyers who reported needing to buy a home closer to work due to offices reopening (34%) was higher than the overall average (26%).

Prospective Black buyers face housing accessibility issues but are financially prepared to compete

Realtor.com survey data suggests a lack of accessibility to critical resources. Compared to overall respondents who plan to buy within the next 12 months, fewer Black buyers reported taking many of the steps that could help them get ahead of the competition, including:

Looking at listings online: at 37% versus 44% overall; researching the process and requirements: at 25% versus 29% overall; contacting at least one real estate agent: at 23% versus 28% overall; getting pre-approved for a mortgage: at 18% versus 21% overall.

At the same time, many prospective Black buyers are prepared to utilize competitive financial strategies, such as paying above asking price: 31% are willing to go 21% or more above asking; larger down payments: Almost half (48%) plan on putting at least 21% down; saving for down payments: 42% are setting aside funds each month, 38% cut back on daily spending and 27% sold investments.

In 2021, Black real estate wealth hit a record high of $2.2 trillion in the third quarter of the year—signaling that Black real estate wealth could continue to improve over the next decade. Redfin’s chief economist, Daryl Fairweather, just published a report explaining other reasons for optimism about Black homeownership. Here are few of them:

A credit system overhaul: The Financial Services Committee has proposed legislation that could narrow the Black-white credit gap by protecting the credit standing of victims of predatory lending and creating federal oversight into credit scoring models. 

The YIMBY movement: The YIMBY (yes in my backyard) movement aims to do away with exclusionary zoning that prohibits multifamily housing. There have already been several major wins in recent years, as was seen in California, Oregon and Minneapolis—all places that have successfully eliminated single-family zoning. 

Remote work: The normalization of remote work will allow companies headquartered in places with low Black populations such as Silicon Valley and Seattle to hire Black workers in places where they are more likely to live, like Atlanta and Houston.

Black real estate wealth: The total value of homes owned by Blacks in America–rose 28.9% year over year to a record high of $2.2 trillion in the third quarter of 2021, according to data from the Federal Reserve. Black real estate equity–real estate value minus mortgage debt–also set a record at $1.4 trillion, a 45% increase from the previous year.

The share of real estate wealth owned by Black Americans also hit a record, but remains disproportionately small at 6%, up from 5.3% the previous year. White (non-Hispanic) Americans own a disproportionately large share of real estate wealth at 75.7%, down from 77.1% the previous year. Blacks represent 13.4% of the U.S. population, while non-Hispanic white people represent 60.1%.