Economic Outlook

Nadia Evangelou, NAR Research

During the pandemic, a booming housing market has contributed significantly to the recovery of the U.S. economy. Home sales activity rose to its highest level in 14 years in 2020. And with an uptick in home sales came other economic boosts: with each home sale, there are expenditures related to lawn care, home remodeling, new furniture, mortgage origination, moving and an inducement to build new homes. The National Association of REALTORS® estimates that every home sale generates $89,000 in the national and local economy. The impact is even stronger in the District of Columbia, with every home sale contributing $185,000 to its economy. (For more context on our region: the economic impact of a home sale in Maryland is $97,000.)

Nevertheless, not all families have the same opportunities to own a home, with many facing additional hurdles. Indeed, there are sizable differences in the homeownership rate among minorities, with the rate of homeownership for minority families lagging behind the national average. As a result, the net worth for minority families is also lower. At $188,200, the net worth of a typical White family was nearly eight times greater than that of a Black family ($24,100) in 2019.

Specifically, the homeownership rate for White Americans has consistently been nearly 70% since 2017. In the same period, the homeownership rate for Black Americans has been nearly 30 percentage points lower than that of White Americans—a few points above 41% from 2017 on. For Hispanic Americans, the homeownership rate has held at a few points above 47%, and

Homeownership rates by race (2009-2019) for Asian Americans it has 71.0% 69.8% been above 59% over the same time period. Moreover, in the last 10 years, 60.7% while the homeownership 59.5% rate fell for all races, except for Asian Americans, Black Americans still experienced the largest decline in home48.1% 44.5% 48.1% ownership. 42.0%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

White Black

Source: NAR calculations of ACS PUMS data

Asian Hispanic

In the District of Columbia, fewer Americans own a home than nationwide. There, homeownership across all races lags significantly behind the national level: 49% of White, 40.3% of Asian, 40.3% of Hispanic and 34.2% of Black Americans own a home. High housing costs may be one reason that homeownership is lower in the area. Specifically, as of December 2020, the median home price ($639,500) was twice the national median home price ($309,800). Comparing the homeownership rates among races, the gap of homeownership between White and Black Americans is significantly smaller, at 15%, than it is nationwide. Nevertheless, in Montgomery County––with the exception of Black Americans––homeownership outpaces that at the national level. In this area, 72.8% of White, 73.4% of Asian, 49.3% District of Columbia 49.0% of Hispanic and 41.3% White Montgomery County 72.8% of Black Americans are U.S. 69.8% homeowners. Asian homeDistrict of Columbia 34.2% ownership is very strong in Montgomery County since Black Montgomery County 41.3% Asian Americans have the U.S. 42.0% highest homeownership District of Columbia 40.3% rate in the area, outpacing Asian Montgomery County 73.4% White Americans. Still, the U.S. 60.7% gap of homeownership District of Columbia 40.3% between White and Black Americans is bigger than Hispanic Montgomery County 49.3% nationwide. U.S. 48.1% Calculations of ACS PUMS data

With homes selling within a month, it’s no surprise that home prices are continuing to rise. In fact, home prices have risen more than 13% since 2017. Meanwhile, mortgage rates are hovering into record lows, with significantly lower borrowing costs. But fast-rising home prices seem to be eroding the benefits of the current low rates in the area, making it more difficult for some Americans to accomplish their home-buying dreams. Although housing is more affordable for Black Americans in 2019 compared to 2009, only 14% of Black Americans can afford to buy the typical home compared to 56% of White, 39% of Asian and 36% of Hispanic Americans.

With the nation’s attention focused on shrinking racial inequality, particularly as it relates to Black Americans, the National Association of REALTORS® released a five-point plan last year that would help close the persistent gap in homeownership rates between White and Black Americans, including building more homes, building more homes in opportunity zones, increasing access to down payment assistance, strengthening the Federal Housing Administration’s loan program and expanding alternative credit score models. While saving for a down payment can be the biggest hurdle for Americans to become homeowners, increased access to federal down-payment assistance based on a certain income threshold is vital to ease the homeownership gap between White and Black Americans. The proposed tax credit of $15,000 for first-time homebuyers could help more Black Americans to achieve their homeownership dream.