According to the U.S. Census Bureau, in 2019 the homeownership rate was 42.1 percent for Black, 47.5 percent for Latinx, and 73.4 percent for White households.12 Census estimates for the second quarter of 2020 report that the Black homeownership rate of 47.0 percent, and 76.0 percent for non-Hispanic White households.13 Figure 1.1 shows the rate of homeownership for Black households relative to White and other races over time. For Black households, the homeownership rate was at its highest around 2004, a time which coincided with the proliferation of subprime mortgage lending. The Black homeownership rate began to decline before the 2008 financial crisis, and this downward trend continued until 2018 when the low interest rate environment and strong economy overall led to gains in homeownership for Black households. In addition, the gap between Black and White homeownership has remained relatively constant over time-- only for a brief period in the early 2000s were there signs that this gap was narrowing. The Black-white homeownership gap in 2020 was 26 percentage points, only slightly lower than the 26.8 percentage point gap in 1960, before the passage of the 1968 Fair Housing Act.
Figure 1.1 - Black homeownership was 47 percent in 2020 and has yet to reach pre-2008 crisis levels.
Another benchmark for comparing Black homeownership is the distribution of all U.S. households. As shown in Figure 1.2, 13 percent of all U.S. households are Black, (non-Hispanic), while only 8.9 percent of owner households are Black. White households represent 66.3 percent of all U.S. households, but represent 74.8 percent of owner households.14 Among new home buyers in 2018, whites accounted for 62.4 percent, Hispanics 10.8 percent, Asians 6.5 percent, and Blacks 6.2 percent (HMDA 2018). Thus, the proportion of new Black homebuyers is less than half of the proportion of Black households in the U.S. (13 percent).
Figure 1.2 - Blacks are under-represented among owner households.
Because socio-economic disadvantage influences multiple factors related to the homeownership gap,15 the next sections are focused on key characteristics of Black homeowners, as well as demographic variations in the homeownership gap.
Age
As shown in Figure 1.3 below, the Black-White homeownership gap is high across all age groups. The smallest gap is among those who are over age 65, which suggests that Blacks become homeowners later in life. Still, the homeownership rate is 62.4 percent for Blacks over age 65, relative to 81.4 percent for Whites in this age group.
Figure 1.4 shows the age distribution of homeowners by racial and ethnic group. The proportion of Black homeowners who are under 35 years old, shown in pink, is 7 percent compared to 9.4 percent for White, 13.9 percent for Hispanic and 11.4 percent for Asian homeowners. Thirty-one percent of Black homeowners are 65 or over, compared to 35 percent of White homeowners. At the same time, only approximately 20 percent of Hispanic and Asian homeowners are aged 65 or older, which may reflect differences in household composition. These findings are consistent with the patterns of life expectancy in the overall population. For example, 11 percent of the overall Black population in the U.S. is over 65 compared to 19.3 percent of the White population.
Gender
Figure 1.5 compares the proportion of households headed by women versus men by race and ethnicity. Blacks have a higher share of owner households headed by females than any other category of owner households.Figure 1.3 - Homeownership rates are especially low for younger Black households.
Figure 1.4 - Homeownership rates for Black householders under age 35 are lower than rates for other groups.
Figure 1.5 - Black owner households are more likely to be headed by females.
For all racial/ethnic groups, females have slightly lower homeownership rates than males. However, as shown in Figure 1.6, in the case of Black homeownership, the gender gap in homeownership is negligible compared to other racial and ethnic groups.
Figure 1.6 - The gender gap in homeownership rates for Black households is small relative to other groups.
Figure 1.7 - Black homeowners are less likely to have a college degree.
Education
Not surprisingly, racial gaps in educational attainment contribute to homeownership disparities. For example, 85.4 percent of the Black population in the U.S. graduated from high school, compared to 92.5 percent of Whites, and 67 percent of Hispanic/Latinx adults. As shown in Figure 1.7 below, White and Asian homeowners are more likely to be college graduates, while this is not the case for Black homeowners or Hispanic/Latinx homeowners.
In addition, Figure 1.8 shows that returns to educational attainment are significantly lower for Black graduates than for White graduates. The homeownership rate for Blacks who graduated from college is only 3.2 percentage points higher than that of White high school dropouts.16
Student loans used to fund college education affect homeownership opportunities. For Black college students, 86.4 percent have some form of student loan debt. Twenty-nine percent of 2015–16 bachelor’s degree recipients graduated without debt, but only 14 percent of African American graduates were able to avoid student loans. Thirty-three percent of African American bachelor’s degree recipients owe $40,000 or more in debt, compared with 18 percent of White graduates and 13 percent of Hispanic graduates. The average student loan payment in 2019 was $393 per month, and the median was $222.17 Student loan payments are included in debt-to-income calculations used for mortgage underwriting. For most loan types, including conventional and FHA, either 1.0% of the outstanding student loan balance or the payment that is reported to the credit bureau is included in the DTI calculation. Student loans also affect FICO scores, in terms of the total debt outstanding, the monthly payment amount, as well as payment history.18
Figure 1.8 - Homeownership rates for college-educated Black Americans are lower than than of White high school graduates.
Policy interventions such as the Employer Participation in Repayment Act proposed in 2020 could make it easier for employers to provide tax-free assistance to help graduates offset their student loan debt.19 In another positive example, the CARES Act suspended all federal student loan payments and debt collections until September 30, 2020, without penalty to borrowers’ credit history; also, these loans are charged 0 % interest during this period.20
Recent reports on the latest version of the FICO Score, FICO 10, suggest that less emphasis will be placed on high student loan balances than in prior FICO score models. 21
Figure 1.9 - Black households earn 40 percent less than White households; White households have 10 times higher net worth.23
Income & Wealth
Racial gaps in income and wealth are primary drivers of the homeownership gap. The cumulative effects of these stark disparities manifest themselves in access to mortgage credit and homeownership opportunities, via income and downpayment and reserve requirements, debt-to-income (DTI) ratios, loan-to-value (LTV) ratio and credit history. As depicted in Figure 1.9, on average, Black household incomes and net worth are significantly lower than those for White Americans. In 2018, for example, the median income for Black households was 40 percent lower than the median for White households. The effects of cumulative disadvantage are also readily apparent in wealth disparities. In 2018, White households had a median net worth that was 10 times higher than the median net worth for Black households. The Federal Reserve reports that approximately 20 percent of Black households have zero or negative net worth, compared to 9 percent of White households .22
Geographic Location
Where do Black homeowners live? The Black population in the U.S. is concentrated in major cities. Sixty-two percent of the Black population are concentrated in 20 MSAs. Homeownership rates range from 31.9 percent in Los Angeles to 49.8 percent in Richmond, VA. It is also worth noting that in 2019, 25.6 percent of the Black population resided in areas where the median house price is above that for the U.S.-- $253,000.24 Table 1.1 lists the metropolitan areas with the highest percentage of Black households, and the corresponding homeownership rate, the Black-White homeownership gap, median home price, and the NAHB Wells Fargo housing opportunity index. This index is a measure of affordability, calculated as the share of homes sold in that area that would have been affordable to a family earning the local median income, based on standard mortgage underwriting criteria.25
Table 1.1 - Homeownership, house prices and affordability vary across MSAs with the highest concentration of Black residents.
Metropolitan Statistical Area
Black HO Rate
Black-White HO Gap
Median Home Price
Housing opportunity index 2020 Q1
Los Angeles-Long Beach-Anaheim, CA
31.9%
25.6%
$ 650,000
10.4%
Boston-Cambridge-Newton, MA-NH
38.5%
30.1%
$ 421,000
49.2%
New York-Newark-Jersey City, NY-NJ-PA
33.9%
32.8%
$ 418,000
32.4%
Washington-Arlington-Alexandria, DC-VA-MD-WV
51.7%
20.2%
$ 397,000
71.8%
Miami-Fort Lauderdale-West Palm Beach, FL
46.4%
27.9%
$ 269,000
32.4%
Baltimore-Columbia-Towson, MD
46.2%
31.4%
$ 254,000
81.1%
Orlando-Kissimmee-Sanford, FL
47.6%
23.7%
$ 235,000
57.2%
Richmond, VA
49.8%
25.2%
$ 233,000
75.8%
Virginia Beach-Norfolk-Newport News, VA-NC
42.3%
28.6%
$ 229,000
78.2%
Chicago-Naperville-Elgin, IL-IN-WI
40.3%
35.2%
$ 229,000
64.5%
Charlotte-Concord-Gastonia, NC-SC
44.1%
31.4%
$ 227,000
72.5%
Dallas-Fort Worth-Arlington, TX
35.3%
33.9%
$ 225,000
54.5%
Atlanta-Sandy Springs-Roswell, GA
48.3%
28.6%
$ 225,000
72.8%
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD
48.1%
27.4%
$ 220,000
67.6%
New Orleans-Metairie, LA
47.4%
28.2%
$ 199,000
60.5%
Houston-The Woodlands-Sugar Land, TX
41.1%
30.5%
$ 197,000
60.5%
Detroit-Warren-Dearborn, MI
42.1%
36.9%
$ 164,000
81.0%
St. Louis, MO-IL
39.4%
37.1%
$ 163,000
87.2%
Memphis, TN-MS-AR
44.3%
32.8%
$ 147,000
74.3%
Cleveland-Elyria, OH
34.5%
41.0%
$ 135,000
84.2%
Many of these metropolitan areas are highly segregated by race. Figure 1.10 below shows the dissimilarity index, a measure of racial segregation, for each of these areas.26 Also depicted is the Black-White homeownership gap. In many cases, e.g. New York, Chicago, Detroit, St. Louis, Cleveland, greater homeownership gaps are accompanied by higher levels of segregation. In fact, across all MSAs, the correlation between the homeownership gap and the dissimilarity index is 0.419, which suggests that there is a positive association between these two metrics. Otherwise stated, racial segregation and homeownership patterns may be influenced by the same, unobserved factors-- linked to a history of racism in financial and housing markets. There is also evidence that racial segregation has declined in recent years, but income-based segregation has increased.27
Figure 1.10 - The Black-White homeownership gap tends to be higher in more racially segregated areas.
Home Values
As shown in Table 1.2, both median and mean house values of Black owners are lower than other racial/ethnic groups. Due to lower incomes and wealth levels and other credit constraints, Black homebuyers have less capacity to qualify for larger mortgage loans or more expensive homes.
There is considerable evidence from prior research that home values in predominantly Black neighborhoods tend to be lower than values in similarly-situated neighborhoods with lower minority concentrations.28 Research also suggests that neighborhood housing appreciation declines significantly as the share of minority residents increases,29 and this pattern can be observed in neighborhoods where a mere two percent of the residents are Black.30 These patterns are likely due to segregation and lingering effects of redlining, which over time suppress equity accumulation and intergenerational transfers of wealth.31
Median
Mean
Median
Mean
Table 1.2 - Home values are lower for new Black home buyers and existing homeowners.
New home buyers
White
Black
Hispanic
Asian
$255,000
$215,000
$225,000
$395,000
350,194
255,878
288,118
526,061
All homeowners
White
Black
Hispanic
Asian
$220,000
$155,000
$200,000
$440,000
321,114
221,406
282,697
585,080
The differences in home values for Black versus White owners from 1997 to 2018 are presented in Figure 1.11 below. These differences narrowed a bit between 1999 and 2001 but have remained relatively stable ever since. Based on the average home values for all homeowners in 2018, homes owned by Black families had values that were 45 percent below those with White owners.
Figure 1.11 - Average home values for Black owners were 45 % lower than White owned homes in 2018.
Figure 1.12 depicts the difference in house price appreciation over time for homeowners in neighborhoods with high concentrations of Black versus White households, across income levels. In 2017, home prices in neighborhoods with a high concentration of Black borrowers were 6 percent lower than in 2006. By contrast, home prices in predominantly White census tracts had increased by 3 percent. In addition, higher-income borrowers in Black neighborhoods are more likely to have faced negative house price appreciation than lower-income borrowers in areas that are mostly White. These disparities affect the property taxes charged to Black-owned households relative to White homeowners. For example, recent research suggests that residents of predominantly Black neighborhoods pay higher tax assessments than their White counterparts, because tax assessments increase at a faster rate than home values in Black areas. There is also some evidence that Black homeowners were less likely to appeal tax assessments and less likely to win tax assessment appeal cases.32
Figure 1.12 - Since the 2008 crisis, Black homeowners in all income categories are more likely to face negative house price appreciation. 33
Median percent change in house price index by neighborhood race and borrower income level 2006-2017
Affordability
For the 20 MSAs with the highest Black population, Figure 1.13 shows the Black-White homeownership gap, the Black homeownership rate, and the Wells Fargo/NAHB housing opportunity index (HOI), a measure of affordability which shows the proportion of the population in an MSA that can afford the median priced home. Some of the most affordable MSAs include Baltimore, Detroit, St. Louis, Memphis and Cleveland, yet these MSAs have Black homeownership rates that are at or below average. The Black-White homeownership gap is also relatively high in these MSAs.
Figure 1.13 The Black-White homeownership gap is greatest in some of the most affordable MSAs.
Market Opportunities for Black Homeownership
In 2019, approximately 472,000 home purchase mortgages were obtained by Black homebuyers, a marked increase from 2018, when about 247,000 mortgages to Black borrowers were originated. Assuming an average downpayment, this amounts to over $113 billion in home purchases. In addition to the contributions to Black homeownership, these figures represent a potential $6.8 billion in real estate commissions, and significant opportunities for real estate professionals who serve these communities. Loan applications from and originations to Black homebuyers nearly doubled between 2018 and 2019.
It is also likely that many of the applications that do not appear as originations in these data were denied or withdrawn for some reason, but ultimately result in approved mortgage loans. Thus, application numbers are also an indicator of market potential. As shown below, there were over 690,000 loan applications that were either rejected, withdrawn or incomplete in 2018 and 2019.
This chart also shows regional variation in application and lending activity. In both 2018 and 2019, there was nearly twice the number of loan applications and originations for Black borrowers in the South as there were in the West, Northeast and Midwest regions combined. According to recent research released by Freddie Mac, the shortest times required to save for a 3 percent downpayment for Black homebuyers are in the South and Midwest. 34
Figure 1.14 Lenders received over 966,000 mortgage applications from prospective Black homebuyers in 2019.
The sheer size and earning potential of the Black Millennial population presents substantial opportunities for expanding Black homeownership. Researchers suggest that due to student loan debt, high house prices, and lifestyle trends such as delayed marriage and parenthood, Millennials have lower homeownership rates than previous cohorts.35 Still, although some estimates suggest that these factors will delay Millennial homebuying by 7 years or more, 89 percent of Millennials report intentions to become homeowners eventually.36 Figure 1.15 lists the concentration of Black Millennials by metropolitan area. The highest concentrations of this demographic group reside in the Atlanta, DC, Dallas and Miami metropolitan areas.
Figure 1.15 Highest concentrations of Black Millennials are in Atlanta, DC, Dallas and Miami Metro Areas 37
Another indicator of market potential is the proportion of families earning over $110,000 per year, or the top 25 percent of Black earners. Approximately 17 percent of Black households nationwide had incomes over $110,000. These households tend to be concentrated in a relatively small number of metropolitan areas. For example, as shown in Figure 1.16, 14 percent of high-earning Black households are located in the Washington, DC area, and an additional 10 percent are located in the Atlanta area. The Houston, Philadelphia and Dallas metropolitan areas also include relatively high concentrations of high-earning Black households.
Figure 1.16 Highest concentrations of Black families earning over $110,000 are in DC and Atlanta Metro Areas.38
How many of these Black households are prepared to become homeowners? Research sponsored by Freddie Mac, presented in Figure 1.17, suggests that as of 2019, there were approximately 2.9 million Black ‘mortgage-ready’ households in the U.S. These include potential homebuyers who are under 45 years of age, living in a geographically affordable area where there is adequate supply of housing and who have the income and credit history to qualify.
Figure 1.17 There are 3 million Black Americans who could qualify for a mortgage. 39
Overall #*
Overall %
Black #*
Black %
Latinx/Hispanic #*
Latinx/Hispanic %
Younger Millennials #*
Younger Millennials %
Older Millennials #*
Older Millennials %
“Mortgage Weak”
56.1
49%
11.3
72%
14.5
57%
11.1
46%
17.2
44%
“Mortgage Ready”
37.0
32%
3.0
19%
7.9
31%
11.4
47%
13.0
33%
Mortgage Owner
21.1
18%
1.4
9%
3.0
12%
1.6
7%
9.3
24%
*in millions
Overall
Black
Latinx/Hispanic
Younger Millennials
Older Millennials
#*
%
#*
%
#*
%
#*
%
“Mortgage Weak”
56.1
49%
11.3
72%
14.5
57%
11.1
46%
17.2
44%
“Mortgage Ready”
37.0
32%
3.0
19%
7.9
31%
11.4
47%
13.0
33%
Mortgage Owner
21.1
18%
1.4
9%
3.0
12%
1.6
7%
9.3
24%
Figure 1.18 ‘Mortgage ready’ Black Americans could save enough for a 3 % down payment in 2.2 years and 5% down in 3.6 years. 40
"Time to Save" (years)
20% down | "Time to Save"
5% down | "Time to Save"
3% down | "Time to Save"
Monthly Net Income
Median House Price (SFH)
Race/Ethnicity
14.4 years
3.6 years
2.2 years
$4,326
$243,076
Non-Hispanic White
15.4 years
3.8 years
2.3 years
$3,679
$215,774
African American
24.5 years
6.1 years
3.7 years
$3,588
$349,351
Asian
23.5 years
5.9 years
3.5 years
$4,485
$428,789
Summary
In this section, we have provided a detailed overview of the State of Homeownership in Black America. We examined Black homeownership patterns by age, gender, income, wealth, and geographic location. We also presented an analysis of market opportunities for expanding Black homeownership, particularly for Black Millennials, high-earning Black households, and those who have a financial profile that could qualify for a mortgage loan. The next section is focused on characteristics of the mortgage market and mortgage lending for Black borrowers.