Black homeownership rates are in free-fall. All homeownership rates have declined steadily since 2004, and they’re now hovering at their lowest levels since the mid-1990s. But black homeowners, targeted disproportionately by subprime lenders during the housing bubble, suffered tremendous losses in the subsequent foreclosure crisis. Today, African-American homeownership rates are at their lowest levels in 50 years—since before the passage of the Fair Housing Act in 1968.
This crisis is so significant that many African-American households may no longer aspire to buy homes, according to Dan Immergluck, professor in urban studies at Georgia State University. Some studies find that homeownership carries more risk than upside for black households. The recovery largely bypassed black households, for reasons that range from tighter credit markets to damaged credit scores to poor enforcement of fair housing law. “Blacks were pummeled by the crisis but haven’t been able to benefit from the recovery,” he says.
Yet black households that did buy homes tell a more optimistic story, according to new research led by Immergluck. While relatively few in number, African-American homebuyers across 15 metro areas saw their home values rise as much if not more than those of their white counterparts. The median black homebuyer saw her home’s value rise by 38.2 percent between 2012 and 2017—much more than the median appreciation rate of 29.9 percent for white households.
That holds true for households across income levels—meaning that low- or moderate-income black homebuyers enjoyed home appreciation rates comparable to low- or moderate-income white homebuyers. Taking out high-income households doesn’t change the story. And in places where black home values did not appreciate as much as white home values, the gap was not substantial.
The new research reveals the massive missed opportunity at the heart of the recovery, a missing key to minimizing the racial wealth gap. Between 2012 and 2017, black homebuyers got as much benefit out of the recovery as whites. There just simply weren’t nearly as many black homebuyers. That has implications for growing metro areas and gentrifying neighborhoods alike.
“Blacks are not buying much in predominantly white neighborhoods,” Immergluck says. “Thirty percent buy in majority black neighborhoods. A lot of black buyers are buying in neighborhoods that are not majority anything. There’s a lot of those neighborhoods. There didn’t use to be.”
For the working paper, Immergluck and researchers Allison Powell and Stephanie Earl used both Home Mortgage Disclosure Act data as well as new housing price indices from the Federal Housing Finance Agency to assess homebuyer data at the census tract level. Across 15 metro areas, median home value appreciation rates for black homebuyers generally exceeded those for whites, with a few exceptions. Most metro areas also saw pronounced gains for Latinx households relative to whites, and mixed results for Asian households.
Across Immergluck’s findings, location matters. Metro character registers as a factor in how black-owned homes fared. In cities where growth is the rule (Atlanta and Los Angeles, for example), all racial groups of homebuyers saw median appreciation rates of 40 percent. Everyone struck gold. But in the three metro areas where the median metro appreciation rate fell below 16 percent (Cincinnati, Birmingham, and St. Louis), black homebuyers’ appreciation rates lagged behind those of whites.
A metro area’s racial makeup is a factor in where black households purchase homes. The maps below show home purchases in Atlanta, a booming metro area with a large black population. Red dots on the map on the left show new black-homebuyers’ mortgages for 2012; those on the map of the right show new mortgages for white homebuyers. Both maps are shaded for home value five-year appreciation rates (in green), which indicates how those 2012 purchases eventually did.
Home purchases by blacks in 2012, shown on the left, follow no particular pattern, geographically. (The map does show how few black people bought homes as the recovery was gaining ground!) The map on the right shows what Atlanta residents already know, that white households preferred to buy homes in north Fulton and DeKalb Counties—primarily white areas. While black homeowners bought few homes in these white enclaves, they too looked to the suburbs.
“The vast majority of black buying is suburban,” Immergluck says. “It’s inner suburbs. These are very diverse suburbs, much more diverse than the city. Gwinnett County is the most diverse county in the country,” he says, referring to the northeastern suburban county with high levels of both black and white home purchases.
In St. Louis, a more racially segregated metro area, black homebuyers were more likely to buy in majority-minority areas. Fully 38 percent of black-home purchases happened in majority-black neighborhoods in 2017. Spatial concentration is true for both black and white homebuyers. That might be nothing more than preference at work. However, while median home appreciation rates were low across St. Louis (13.8 percent), they were lower for black homebuyers than for white homebuyers—although not by much.
The roughly 26,000 black households that purchased homes in 2012 saw impressive gains over the next five years. Prices for their homes appreciated by more than $1.7 billion in total—or an average of $65,000 per homebuyer. If more black households had been able to take advantage of low costs and surplus homes at the bottom of the housing crisis, then all kinds of narratives might be changing today, from gentrification to segregation. (But then, one of the main stories of the housing crisis was the disproportionate exploitation of black homebuyers through predatory loans).
Among white, black, Latinx, and Asian households, blacks saw the largest percentage increase in the number of homebuyers between 2012 and 2017. Over the five years of the recovery, purchase loans for black households nearly doubled in number, from 26,091 in 2012 to 51,551 in 2017—a 98 percent increase. So there’s good news for black renters looking to build housing wealth today.
By and large, this steep increase owes to just how low black home-purchasing power had fallen by the end of the foreclosure crisis. For black homeowners to bridge the racial wealth gap, many more black households will have to join their ranks. Those that bought homes did well: Nearly 75 percent of homes bought by blacks increased more than 20 percent in value over five years, and almost half increased by 40 percent. That compares to and even exceeds appreciation rates for white households.
How can more black households share in housing wealth? And is that still a worthwhile goal?
Immergluck’s working paper includes a few observations to this end. First, he says, “metro matters”: Black homebuyers did best, and relative to white homebuyers in particular, in strong housing markets. Black households lag behind whites in weaker metro areas—although, again, not by much. The story of black homeownership today is one of diversifying neighborhoods. A map of home purchases in 2017 in Indianapolis shows that black home purchases were fairly spread out among neighborhoods of varying ethnic composition. Not so much for white households, who bought homes in mostly white areas.
Protecting gains for black households means preserving the consumer protections put in place to prevent another foreclosure crisis—namely the Dodd-Frank Act. A strong Consumer Financial Protection Bureau, aggressive enforcement of Fair Housing Act standards, and continued support for low-cost lending under the Federal Housing Administration are key to bolstering black homeownership.
Minimizing risk-based pricing in the mortgage market is important for expanding black homeownership, too. Privatization of Fannie Mae and Freddie Mac, a looming priority for the federal government, would enable lenders to assign greater weight to risk in pricing. That would have a disparate impact for buyers of color, Immergluck says. It’s also critical to ensure that financial instruments are safe. Stripping regulations could signal the return of subprime mortgages and other predatory products.
Historically, black households have struggled to get the same mortgages for the same homes in the same neighborhoods as whites. Today, black households are largely buying homes in areas that aren’t majority anything. Black homeownership is part of the narrative of the emerging, diverse, close-in American suburb.
Easing the racial wealth gap in America, however, inevitably means addressing the devaluation crisis in majority-black neighborhoods—an obstacle for black homeownership. The Brookings Institution just issued a report that shows that assets in black neighborhoods are worth less than comparable assets in white neighborhoods, including housing. Homes of similar quality are worth 23 percent less in majority-black neighborhoods compared to those with almost no black residents—a difference of $48,000 per home, on average.
“My students ask, ‘Doesn’t homeownership create inequality?’ Well, it does, partly because it’s distributed unequally,” Immergluck says.
If homeownership is to make any dent in the racial wealth gap, then lawmakers will need to affect policies that preserve the gains made by black homeowners and expand their ranks. Which, in turn, means crafting policy to boost the social mobility of majority-black neighborhoods, where bigoted perception alone can cast values downward. “We need to reaffirm minority homeownership,” Immergluck says, “as a way to reduce wealth inequality.”