Redfin Report: African Americans still face massive barriers to homeownership!

Redfin Report:

African Americans still face massive barriers to homeownership!

Owning a home is one of the greatest achievements on American soil! Owning a home has been linked to building intergenerational wealth but the American homeownership story is one marked by a legacy of discrimination where minorities are completely left out of the picture in the country of the free!

Over the last decade, homeownership for African Americans has shown dramatic declines than it is for any other racial or ethnic group in the country. In fact, data shows that in 2020, the rate of Black homeownership was just 1.5% higher than it was in the 70s when the race was partly legal.

Discrimination, especially in housing is a deeprooted legacy and what makes it worse is the fact that the government legalized it through its policies that were largely created to perpetuate private attitudes that date back to the days of slavery. The Federal government started to push for the expansion of homeownership in the New Deal Era through the innovations like the 30-year mortgage. While there is a lot of documentation regarding discrimination against Blacks and other minorities, I feel like we are not talking enough about redlining which was legal and done by a federal institution. Redlining labeled certain areas as high risk and therefore, applicants from those areas could not be given a loan. Did I mention that these were also the areas where most African Americans lived? It was even worse because the mortgage was denied to even the white folks who lived near the area. In fact, speaking at an interview about the 1968 Fair Housing Act with Eric Lawrence Frazier, The CEO and Founder of the Power Is Now Media, Craig Fergusson, the Vice President of the National Homebuyers Fund had this to say;

“...first of all the act was great but it was too late and I’m not sure enough was done and I’ll say this because everyone knows that the greatest form of creating wealth is homeownership… I mean if you go back to even the 1930s FHA wouldn’t insure homes for African-Americans they wouldn’t! They just refused FHA out of federal homeownership they just wouldn’t and they also wouldn’t insure homes to white neighborhoods that were close to black neighborhoods.”

The African Americans and other minority communities in the U.S. were relegates to the redlined areas on government-sponsored maps and don’t forget, these were the areas with the most concentrated poverty and where getting proper housing was a miracle!

The Fair Housing Act of 1968 was a saving grace for the minorities, as it identified the segregationist practices and abolished them. In a special series dubbed the Fair Housing Series, Eric interviews key industry leaders about the Act and whether it has been successful in helping minorities. The act, while it changed most of the segregationist agendas, was meant for the future and ignored undoing the foundational racist approach on which homeownership in the country was built.

If you want to know that redlining worked, look at the homeownership rates for African Americans. During this dark era, the residents of the redlined communities did not receive loans to purchase let alone renovate their homes. This ultimately started a domino effect where disrepair homes led to the decline of a community’s housing stock and with the fall of the community and neighborhood’s properties businesses were forced to shut their operations with no businesses tax revenues were lost and with no taxes funding for schools was depleted!

In fact, the redlined areas today struggle with high poverty rates and failing health infrastructure which consequently leads to shorter lifespans. A report by Redfin real estate brokerage found that African Americans are five times more likely to purchase a home in the formerly redlined areas than in the greenlined areas which has resulted in a continued decline of home equity. This to some extent explains the wealth gap between whites and African Americans.

According to Redfin, just 45.1% of African Americans bought homes or own homes as of the first quarter of 2021, 28.7% less compared with the non-Hispanic Whites.

LET’S DIG DEEPER INTO THE REDFIN STUDY

Redfin reveals that 23% of the Whites made no financial sacrifices or commitment whatsoever to buy their first home against the 14% of the Blacks. At the same period, about 30% of African Americans had to take an extra job to cover the payments of their first jobs versus 22% of the White respondents.

Looking at the financial capacity of African Americans against the non-Hispanics whites, 21% of African American homeowners earned $150,000 or more at the time they were purchasing their first home comp[ared to just 11% of the White homeowners. Furthermore, 58% of the nonHispanic Whites were earning less than $50,000 when they first purchased their home versus just 34% of African American homeowners.

Shedding light to this data Daryl Fairweather, Redfin chief economist had this to say, “These findings suggest the financial standard for becoming a homeowner is higher for Black people than white people, making it more difficult for Black Americans to buy homes,” he adds, “Homeownership is closely tied to the American ideal of freedom, and specifically financial freedom. The fact that Black buyers report earning more money and making more financial sacrifices to enter the homeowner class is one example of how difficult it is for Black people in this country to achieve the American dream.”

A while back in June, Redfin had surveyed 1,500 homeowners where 74% of the African American respondents said that they had parents who were homeowners. This was 10 percentage points lower than the White Respondents. In addition, 67% of the Black respondents have grandparents who are homeowners versus 72 percent of the White Respondents.

A separate report by the Brooking Institute in 2018 found that, in the average U.S. Metropolitan area homes in the neighborhood where the population was at least 50% African American, homes were valued at roughly half price as homes in the White Neighborhoods. The report also found that the Metros that were greatly devalued were more segregated and produced less upward mobility for the African American children who grew up in those areas. Between the two communities, the devaluation of homes and businesses in the African American community has led to a cumulative loss of $156 billion in value nationwide.

THE SITUATION WITH MORTGAGES

According to Redfin, 16% of African Americans had their mortgage applications rejected compared to just 7% of the non-Hispanic Whites. Further, the report shows that African American homebuyers were more likely to be turned down due to debt and low credit scores than whites.

“Black people who succeed in buying a home have to be Superman or Superwoman,” said Bryan Greene, vice president of policy advocacy for the National Association of Realtors. “They need to have higher degrees, they have more debt, they face persistent rejection and generally carry around bigger burdens to achieve the same goal as white people.”

The CFPB has also been very vocal about tightening the regulations for mortgage services and originators that are found violating the protection laws. This includes practices like redlining, racist housing policies that continually block African Americans from accessing equitable and affordable housing through the provision of fair mortgage deals. In addition, the agency also found out that lenders engaged in deceptive practices including the violation of the Truth in Lending Act and the Equal Credit Opportunity Act, and further provided wrong data on the mortgage loans.

There is also a collective effort by the Department of Housing and Urban Development (HUD), the Mortgage Bankers Association, the National Association of Realtors, the National Association of Real Estate Brokers to increase the Black Homeownership rate. These agencies have come together to unveil a plan

meant to increase African American rate of homeownership significantly by 2030. These agencies vow to create more than 3 million more black homeowners by the end of the decade.

The future looks promising for African Americans. While the past over 200 years haven’t been a great time to be counted as an African American in the country of the “free!” the future looks bright and that is something to be happy about. However, in order to move forward, we need to address the evils of the past and I am glad that some of the institutions that perpetuated bigotry and discrimination against African Americans are taking responsibility and writing their wrongs! Owning up to these mistakes is where we begin, and then we can have a talk about reparations comfortably. What you need to realize is that the cumulative effects of the legal discrimination and segregationist policies against African Americans meant that they were paying more to become homeowners- else known as the Black tax of homeownership. What makes it worse is the fact that the ability to pay for a mortgage is based on a racist system, one that was built on a racist foundation which presents another huge barrier to homeownership. These are the issues that we need to address first before moving forward. The move by NAR, the largest realtor organization in the country, to acknowledge that they played a big role in housing discrimination is such a great move. I am happy that the organization has even implemented an anti-bias training program for its members. Such are the actions

ABOUT THE POWER IS NOW MEDIA

The Power Is Now Media is an online multimedia company founded in 2009 by Eric L. Frazier, MBA, and is headquartered in Riverside, California. We are advocates for homeownership, wealth building, and financial literacy for low to moderate-income and minority communities. The Power Is Now Media corporate office is located at 3739 6th Street Riverside, CA 92501. Ph: 800-401-8994 Website: www.thepowerisnow.com. that make me truly hopeful and optimistic about the future! It is no more a “we will” talk, it is more of “we are” talks happening on the ground and for sure, I foresee increases in Black homeownership for the years to come. Aside from that, I like what this administration has done. I may not agree with some of the policies, but Pres. Joe Biden’s first executive order to the HUD was “to take steps necessary to redress racially discriminatory federal housing policies.” this has automatically set the pace for the next four years of his presidency!

While we still have a long way to go, at least the journey is already started, it is up to you and me to keep the momentum going. And how can you do that? By simply taking on every opportunity now while there is still a choice. The rates are down, demand is skyhigh and the supply I so constrained. Prices will keep on rising further disadvantaging the African American population and other minorities given the fact that they are resource-constrained. But that doesnt have to be the case for you. Seize the power now, take control and reach out to Eric Lawrence Frazier MBA. with more than 40 years of experience in the real estate and mortgage industry, Eric is your go-to guy for anything real estate-related. Visit The Power Is Now Media, Inc. to read and watch more real estate and mortgage news, videos, and information on current developments in the real estate industry on Facebook Live and our YouTube channel. The Power Is Now Media, Inc. leading the conversation in real estate.

Sources:

https://www.housingwire.com/articles/black-americans-still-face-massivehousing-barriers/ https://www.brookings.edu/research/devaluation-of-assets-in-blackneighborhoods/ https://www.redfin.com/news/redfin-survey-black-homeownershipfinancial-barriers/ https://www.americanprogress.org/issues/economy/ reports/2019/07/15/469838/racial-disparities-home-appreciation/ https://www.npr.org/sections/codeswitch/2021/05/08/991535564/ black-americans-and-the-racist-architecture-of-homeownership