NAR Report: U.S. Homeownership Market Share Increases, But Black-White Ownership Gap Grows to Largest in Decade
Real Estate In-Depth | March 9, 2023
WASHINGTON—While the U.S. homeownership rate has continually increased during the last decade —to 65.5% in 2021 (from 64.7% in 2011)—the Black homeownership rate has not kept pace with increases of other racial groups. Also, people of color endure significant buying challenges throughout and even after their home purchase, according to a report released earlier this month by the National Association of Realtors.
The “2023 Snapshot of Race and Home Buying in America” examines homeownership trends and challenges by race and location to explain the current racial disparities in the housing market. Leveraging NAR’s latest Profile of Home Buyers and Sellers data, the report explores the characteristics of who purchases homes, why they purchase, what they purchase and the financial background of buyers by race.
The report found there were about 9.2 million more homeowners in 2021 than a decade prior, but homeownership rates varied significantly by race. The Black American homeownership rate—44%—increased less than half of one percentage point (43.6% in 2011) and continues to lag well behind Hispanic Americans (50.6%), Asian Americans (62.8%) and White Americans (72.7%). Consequently, the homeownership gap between Black Americans and any other racial group has grown, especially when compared to White households (29%), representing the largest homeownership gap in 10 years (26% in 2011).
Conversely, Asian Americans (five percentage points) and Hispanic Americans (four percentage points) experienced the biggest homeownership rate gains over the last decade. The Asian American homeownership rate of 62.8% is an all-time high. White American homeownership grew by nearly three percentage points and has been consistently around 70% since 2017.
“Unfortunately, the incredible affordability challenges of the last year have hit minority home buyers more than White buyers,” said Jessica Lautz, NAR deputy chief economist and vice president of research. “Black buyers are more likely to be first-time buyers, who are more sensitive to changes in mortgage interest rates, while White buyers are more likely to have housing equity to rely on as they make a housing trade.”
Racial Inequalities in Housing Affordability
Black homeowners spend more of their income to own their homes than all racial groups, with 30% being cost-burdened – defined as spending more than 30% of their income on housing. That’s followed by Hispanic Americans (28%), Asian Americans (26%) and White Americans (21%).
More than half of Black renter households (54%) spend more than 30% of their income on rent, the most of any racial group. About 30% of Black renters are severely cost-burdened—defined as spending more than 50% of their income on rent—representing nearly 2.5 million households. By contrast, 22% of White renters are severely cost-burdened, representing 5.1 million households.
After comparing the qualifying income to purchase the typical home with the median income of renter households, NAR estimates that while 17% of White renters can afford to buy the median-priced home, only 9% of Black renters can nationwide.
“Even among successful home buyers, Black Americans have lower household incomes, which narrows the available pool of inventory they may be able to afford and makes their journey into homeownership even more difficult in this limited housing inventory environment,” Lautz added.
Racial Disparities in the Mortgage Market
Beyond affordability, Black and Hispanic home buyers also face extra challenges in getting a mortgage. Black Americans have the highest denial rates for purchase and refinance loans. According to Home Mortgage Disclosure Act data, 20% of Black and 15% of Hispanic loan applicants were denied mortgages, compared with about 11% of White and 10% of Asian applicants. Further, denial rates for Black Americans are even higher for home improvement loans. Black Americans were denied applications for nearly 17% of loans for a home purchase, 17% of loans for refinancing and 51% of loans for home improvement.
Homebuyer Demographics by Race/Ethnicity
Using data from its latest Profile of Home Buyers and Sellers report, NAR analyzed the characteristics of recent home buyers, their reasons for purchasing, the steps they took in the home buying process, and the ways buyers financed their home purchase based on race. Among all home buyers, White Americans made up the largest share (88%), followed by Hispanic Americans (8%), Black Americans (3%), Asian Americans (2%) and other (3%).
For down payments, Black Americans drew down 401(k)/pension funds more than any other group (16%), which increased two percentage points from last year (14%). Asian Americans received gifts (22%) and loans (7%) from a relative or friend more than all other racial groups.
Hispanic Americans had the largest share of student loan debt (46%), followed by Black Americans (33%), White Americans (17%) and Asian Americans (13%).
Discrimination in Transactions
In addition to being asked about their recent homebuying experience, home buyers were asked if they had experienced or witnessed discrimination during their real estate transaction. Half of Hispanic American home buyers said they experienced steering toward or away from specific neighborhoods, followed by 29% of White, 12% of Black and less than 1% of Asian American home buyers. Forty-six percent of Hispanic American home buyers experienced discrimination by the refusal of a homeowner or agent to show property, followed by 24% of Black, 15% of White and less than 1% of Asian Americans. Thirty-nine percent of Black American home buyers reported discrimination through home appraisal, followed by 17% of Asian, 9% of White and less than 1% of Hispanic Americans.
NAR works to ensure Realtors are active leaders in the fight to close racial homeownership gaps. NAR co-chairs the steering committee for the Black Homeownership Collaborative, which has outlined a seven-point plan to create 3.0 million net new black homeowners by 2030. NAR has also enhanced the real estate industry’s efforts to end housing bias. Its “ACT!” fair housing plan, launched in 2019, emphasizes “Accountability, Culture Change and Training” to advance fair housing in the industry. NAR’s interactive training platform, Fairhaven, puts real estate professionals in simulated situations where discrimination in a real estate transaction can occur. Also, the association’s implicit bias video and classroom trainings offer strategies to help Realtors provide equal professional service to every customer or client.
To increase the nation’s housing inventory, NAR advocates that all levels of government: support the construction of housing that is affordable to the typical consumer; preserve, expand and create tax incentives to renovate distressed properties and convert unused commercial space to residential units; and encourage and incentivize zoning reform. Expanding new-home construction by an additional 550,000 units a year for 10 years would create 2.8 million new jobs and generate more than $400 billion in economic activity. NAR and the Rosen Consulting Group’s “Housing is Critical Infrastructure: Social and Economic Benefits of Building More Housing” report examines the causes of America’s housing shortage and provides a range of actions that can effectively address this long-time problem.