The Times Herald (Norristown, PA)
Color of Money
But households with savings or home equity they can tap are better able to weather the storms.
One important aspect of the report is how homeownership benefits blacks and whites differently, McCargo and Neal highlighted in an interview.
“Redlining is still alive and well in markets today,” McCargo said. “Segregated neighborhoods still exist, and if that neighborhood is predominantly black, it’s valued lower. There is still an appraisal bias.”
The median home value for a black head of household is $155,000, compared to $220,000 for a white head of household, the report states.
“There is a white bias in home values,” Neal said. “Accounting for the structural characteristics of a home and neighborhood amenities, the same home in a neighborhood with no blacks is typically worth more than the median home in a predominately black neighborhood, indicating that it’s much more difficult for black homeowners to build up housing equity.”
Neal said the research also found that the price of homes owned by African Americans was much more volatile. “The huge swings mean their home equity is much more at risk in a scenario of an economic downturn.”
Another key difference for black homeowners is the ability to access their home’s equity during an economic crisis.
“You’ve done the work of building up housing equity. You’ve paid down your debt. Your house is appreciating. And a downturn happens, and mortgage lenders tighten lending standards in such a way that it disproportionately hits African American homeowners,” Neal said.
McCargo also pointed out that home equity makes up a disproportionate amount of the overall net worth for black households. That becomes a problem if they’re unable to refinance to take advantage of lower mortgage interest rates or do a “cashout” refinance to access money during an economic crisis.
Some people will try to justify the racial disparity in lower homeownership rates by characterizing blacks as more financially irresponsible than whites.
“This is not an issue of behavior,” McCargo said. “It is the inequity that is the problem. It’s the same issue that resulted in that man holding his knee on George Floyd’s neck. It’s rooted in a long history of a system that has been working against people of color.”
My grandmother died shortly after my husband and I built our first single-family home. As we surveyed the construction site, Big Mama clasped her hands to her mouth. She didn’t cry, but her eyes watered.
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