For minorities... there is still inequality in the housing market
By Linda Booker, Princeton Mortgage
I want to thank our very own Linda Booker for contributing and bringing an important topic to the forefront in today’s blog.
According to figures released by Zillow this year, less than a quarter of homes nationwide are owned by minorities-despite the fact that African Americans, Hispanics, Asians, and other nationalities make up nearly one-third of the U.S population. Few homes remain on the market, prices in some neighborhoods are higher than they were a decade ago, and many shoppers struggle to find enough cash for a down payment let alone having enough income to maintain a mortgage payment with few signs of significant improvement.
Why is home-ownership so difficult for the minorities? Experts say that low minority home-ownership rates are the result of decades of discriminatory housing policies, financial hurdles, and market conditions that have disproportionately affected people of color. At the same time, continued residential segregation — essentially, residents choosing to live in neighborhoods made up of people of their same race — has posed an equally large problem for boosting minority home ownership. The combination of such factors has created the problems that continue to perpetuate the barriers that minorities face when buying a home today. How exactly did we get here — and where does that leave us?
The origin of the modern minority home-ownership problem can be traced to the 20th century, when the Federal Housing Administration actively engaged in “redlining” — a practice of determining which neighborhoods to approve mortgages in — and which to deny them. From the 1930s through the 1960s, the FHA explicitly refused to back loans for African American home buyers, subsequently pushing many of them into declining, high-poverty areas. From there, some minorities were victims of predatory lending or they were relegated to renting, pushed out of homeownership entirely. Today, redlining is illegal but its aftermath is still palpable. Government policies shepherded minorities to certain neighborhoods, and now, based on the natural preference of wanting to avoid living in areas filled with people who are different from us, minority groups continue to want to live in the same areas together.
According to a study conducted by Charles Camille, a sociology professor at the University of Pennsylvania, the U.S. remains in the top tier of residentially segregated countries. This can be problematic for minority homeowners who want to build wealth. The study showed that homes in black neighborhoods do not see the same appreciation rates as homes in white neighborhoods. One reason for that… a lack of demand from wealthy white households, which, in turn, stifles home price appreciation rates in those neighborhoods.
The good news is, our industry is taking some steps to make homeownership possibly for minorities. Recently, Wells Fargo took a stand to assist in increasing homeownership in the minority communities. The bank has made a commitment to create at least 250,000 African American homeowners by 2027, a commitment that follows their 2015 efforts to increase Hispanic homeownership. Additionally, Wells has committed to increase the diversity of their sales team and support the effort with a $15 million initiative that promotes financial education and counseling over the next ten years.
But is this enough? Is one company’s commitment enough to spark a movement that really helps change the way our industry lends to minorities?
My challenge to our industry is to review your lending strategies and ask yourselves, are we doing enough to help increase the number of minorities owning homes? Given the fact that there are so many road blocks placed in front of us, how are we to live the American Dream?
Photo by rawpixel on Unsplash
The opinions expressed in this post are the sole view of the writer and do not reflect the opinion of Princeton Mortgage Corporation.