Black Americans Face Bigger Financial Barriers to Homeownership Than White Americans

June 29, 2021July 1, 2021 Zhane Squire

A Redfin survey finds 23% of white homeowners report making no financial sacrifices to buy their first home, versus 14% of Black homeowners.

SEATTLE, June 29, 2021 /PRNewswire/ — (NASDAQ: RDFN) — There’s a measurable difference in the homebuying experience for Black and white buyers, with Black Americans facing greater financial and generational barriers to homeownership than white Americans, according to a survey featured in a new report from Redfin (redfin.com), the technology-powered real estate brokerage.

Redfin’s homeownership and race survey, fielded during the first week of June, had more than 1,500 respondents: 238 of the respondents identified themselves as Black, and 499 identified themselves as white.

Here are the key takeaways:

23% of white homeowners made no financial sacrifices to buy their first home, versus 14% of Black homeowners.
21% of Black homeowners earned $150,000 or more when they bought their first home, versus 11% of white homeowners. That suggests Black Americans need to earn more money than their white counterparts to become homeowners.
White homeowners are more likely than Black homeowners to have parents and grandparents who are homeowners, which means they’re more likely to benefit from generational wealth when they’re purchasing a home.

When Thomas Loving was looking to buy a home in Houston, he said the experience was frustrating, and he felt that the homebuying process is “absolutely different for a person of color.”

“It’s not an easy journey. I really struggled trying to get an offer accepted on a house when I arrived in Houston,” said Loving, a cybersecurity professional who spoke at Redfin’s recent Homebuying: The Black Experience symposium. “I earn more than $400,000 a year, even without taking my spouse’s income into account, and I was in a position where I had to jump through hoops to prove that I could afford even a starter home. It was outrageous. Black homebuyers are the exception, not the standard, and people often assume we can’t afford to buy a home even when we have successful careers and earn high incomes.”

Black homeowners more likely to make financial sacrifices, earn high incomes to buy their first home

Twenty-three percent of white homeowners made no financial sacrifices to buy their first home, versus 14% of Black homeowners. Meanwhile, 30% of Black respondents took an extra job to afford their first home, versus 22% of white respondents.

Twenty-one percent of Black homeowners earned $150,000 or more when they bought their first home, versus 11% of white homeowners. And 58% of white homeowners earned less than $50,000 when they purchased their first home, versus just 34% of Black homeowners.

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. That’s one reason for the substantial homeownership gap between the two groups, with 73.8% of white Americans owning their home in the first quarter of 2021 versus just 45.1% of Black Americans.

“Homeownership is closely tied to the American ideal of freedom, and specifically financial freedom,” said Redfin Chief Economist Daryl Fairweather. “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 recent Redfin analysis of mortgage denials supports the idea that there are higher financial hurdles for Black Americans to buy homes: Nationwide, 16% of Black Americans who apply for mortgages are rejected, compared with 7% of white Americans. Black homebuyers are more frequently turned down due to debt and credit scores than their white counterparts.

“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, said at Redfin’s symposium. “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.”

Black homeowners less likely to have parents who are homeowners

Seventy-four percent of Black respondents to the survey have parents who are homeowners, versus 84% of white respondents. And 67% of Black respondents have grandparents who are homeowners, versus 72% of white respondents.

Note that all respondents to Redfin’s survey are homeowners, so the likelihood of having parents and grandparents who are also homeowners is higher than it is for the general population for both races.

Redlining, the racist housing policy that effectively blocked many Black families from obtaining mortgages throughout the middle of the 20th century, is one reason Black homeowners are less likely to have parents and grandparents who are also homeowners. It’s also a significant factor in the comparatively low Black homeownership rate.

For more on the Black homebuying experience and ways Redfin can help address inequalities in the housing market, here’s a recap of Redfin’s recent symposium on the topic: https://www.redfin.com/news/redfin-event-black-homebuying-experience/

SOURCE Redfin