HOMES OUT OF REACH FOR BLACKS
Rising prices mean only 25% of black households can afford to buy
Paul Davidson
Kjara Smith, 30, dreamed of buying a home in Centennial Hills, a manicured Las Vegas suburb brimming with shops, restaurants and parks where she had been living with her aunt and other relatives.
Her vision could have become reality several years ago, before area home prices skyrocketed. Instead, early this year, Smith lowered her sights and purchased a more modest home in a scruffy, older neighborhood in northeastern Las Vegas where crime is prevalent.
“It wasn’t ideal,” she says, adding that she bought a burglar alarm and got a gun as a gift. “For right now, it’s my starter home. I’m making it work for what it is… I needed to find something to get in the game.”
The sharp rise in home prices since the housing market bottomed in 2012 has made homes less affordable for most Americans, but the run-up has especially affected African Americans, like Smith, whose typical incomes have climbed more modestly.
The median-income black household could afford just 25% of U.S. homes on the market last year, down from 39% in 2012, according to data provided exclusively to USA TODAY by real estate brokerage Redfin and based on the 46 largest markets.
By contrast, median-income white households could afford 57% of homes for sale last year, down from 69% seven years ago.
More homes are out of reach
“African Americans who haven’t been able to buy a home since the re
“African Americans ... have only seen prices rise further out of budget.”
Daryl Fairweather Redfin chief economist
covery began have only seen prices rise further and further out of budget,” says Daryl Fairweather, Redfin's chief economist.
Redfin determined affordability based on the median incomes of white and black households and average mortgage rates of 3.35% in 2012 and 4.54% in 2018. The real estate firm assumed homebuyers make a 20% down payment, though many put down far less, a scenario that would further limit affordability.
Home prices in the 46 major markets have jumped 70% since 2012 as the improving economy boosted demand, Redfin data shows. Also, builders largely have put up more expensive houses as they seek to offset rising land, labor and materials costs, Fairweather says. The scarcity of lowerpriced starter homes has driven their prices higher.
The trend has kept some African Americans from buying a home at all while nudging many others to less desirable neighborhoods or remote suburbs that mean longer commutes to work. It also has widened the wealth gap between white and black households, especially since a disproportionate share of black wealth is in homeownership, according to the Urban Institute.
“it will mean they have less housing wealth by the time they retire,” says Jung Hyun Choi, a research associate at the Urban Institute.
Where black households struggle the most to afford homes
Of the 46 largest markets Redfin tracked, the Las Vegas area experienced the most dramatic decline, with just 14.7% of homes affordable to the typical black household last year, down from 61.2% in 2012. Las Vegas area home prices have soared 81% over the past seven years, the most among the 46 metro areas.
Black unemployment reached an all-time low of 5.5% last month, still well above the overall 3.5% U.S. jobless rate. Yet many black people are getting lower-paying jobs that don’t allow them to boost their standard of living, according to the Brookings Institution.
And while African Americans’ income has risen, it hasn’t kept pace with the climb in home prices – or white incomes. From 2012 to 2018, the median household income of black people increased 12.8% to $41,361, while the median income for white people rose 13.1% to $70,642, according to the U.S. Census Bureau.
Black homeownership drops
The share of African Americans who own their homes fell from 43.8% in early 2012 to 40.6% in the second quarter, according to the U.S. Census Bureau. By contrast, the white homeownership rate has edged down slightly, from 73.5% to 73.1%. In 2004, during the housing boom, nearly half of black people owned their homes.
There are other factors that have squeezed black people out of homeownership. From 2007 to 2009, nearly 8% of African Americans lost their homes to foreclosure, compared with 4.5% of whites, according to the Center for Responsible Lending. Many have been replenishing savings and repairing their credit, Williams says.
Meanwhile, black people are less likely than white people to receive a gift from a friend or relative to help with the down payment and twice as likely to have student debt that could constrain their ability to obtain a mortgage, says Jessica Lautz, vice president of demographics and behavioral insights for the National Association of Realtors (NAR).
Las Vegas median prices soar
Smith, the Las Vegas homebuyer, was looking for a house in the $180,000 to $189,000 range but found slim pickings in the area, where the median price has leaped from $159,000 to $289,000 since 2012.
So she bought a two-bedroom, twostory frame house for $167,000, making a 3% down payment through a Federal Housing Administration loan and receiving aid for half that cost through a federal program.
A patient accounts coordinator for a healthcare provider, Smith plans to upgrade to a better house after she earns a degree that will pave the way for a higher salary. But she worries that her home won’t appreciate as much as units in better neighborhoods.
“It’s hard to sell in the area I live in,” she says.