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Why Black Homebuyers Missed Out on the Pandemic Real Estate Boom

Despite the national surge in homeownership, the rate of Black homebuying has changed very little over the last 20 years, a recent study shows. And the pandemic housing boom didn’t really change this.

Between April and July of last year, 82 percent of Americans who bought homes was white, found a study by the National Association of Realtors. A mere 5 percent was Black.

Black American homebuyers made up just 6 percent of homebuyers in 2021. The reasons for such low numbers include high debt held by Black Americans, lower credit scores and less ability to receive help from family, a recently released NAR report concludes.

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Photo by Kindel Media from Pexels

Low Interest Rates, But Higher Home Prices

Although the interest rates for home mortgages are currently low, high debt has kept potential Black homebuyers from getting approved for loans. The average mortgage interest rate is currently 3.2 percent for a 30-year fixed-rate mortgage, according to Bankrate.com. At press time, the median home price was almost $354,000, a 13.1 percent increase from October 2020, according to NAR. 

Potential homebuyers with high debt-to-income ratios are limited in the type of mortgage for which they qualify. Every $10,000 in debt, adds $50 to $100 to an applicants’ monthly debt-to-income calculation. The higher the debt, the more your buying power can be reduced and in some cases, it could decrease the likelihood of even being approved for a loan.

The Urban Institute also found that just 20 percent of Black households possess a credit score over 700, as compared to 50 percent of white households. A person’s credit score plays a huge role in the mortgage rate and your monthly payment plan. The higher the credit score, the lower the interest rate and monthly payments; the lower the credit score, the higher the interest rate and monthly payments. 

In addition to carrying a heavy debt load, potential Black homebuyers found themselves being priced out in the highly competitive housing market.

San Diego-based Everett Benyard, 30, was looking to purchase his first home earlier this year. But the corrections officer has found it difficult to buy a home in one of the country’s hottest real estate markets. The median home price on single-family houses in San Diego reached $860,000 in July, according to the California Association of Realtors.

“I was just getting outbid, outbid big,” Benyard told CNN Business. “I went and saw many different places. … I would go see something and the day after, it would be off the market.”

Benyard’s problem is a challenge many Black homebuyers are coming up against: limited funds competing against homebuyers with deeper pockets.

Finding Strategies to Increase Black Homeownership Rates

The inequity existing in homeownership has not gone unnoticed. Lawmakers are working on federal and local levels to support Black homeownership. 

President Joe Biden’s Build Back Better program has included lowering the price of homes. Biden’s proposal includes offering down payment assistance on a homeowner’s first home as well as zoning reform to provide more opportunities for construction in underpopulated areas. 

In several states, legislators have raised awareness of home appraisal discrimination. 

California passed the Fair Appraisal Act to protect Black homeowners in the appraisal process. This act will not only collect and track appraisal data, but it also outlaws appraisals being influenced by race, color, religion, gender, gender expression, age, national origin, disability, marital status, source of income, sexual orientation, familial status, employment status or military status of either the present or prospective owners or occupants of the subject property or of the present owners or occupants of the properties in the vicinity of the subject property. 

And, New Jersey Assemblywoman Angela V. McKnight has introduced a bill requiring consequences for discrimination in the home appraisal industry. 

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