The truth is that many problems contribute to low black homeownership statistics and homeownership rates. Yes, there are inequality and racial disparities in the housing industry. However, improving black homeownership rates remains important, necessary and achievable. Let’s take a look at the statistics and what we can do about them.
Why are black homeowners so important?
Becoming a Black homeowner and understanding Black homeowner statistics is more than just a home purchase. It is laying the foundation for building wealth for generations. In addition to being one of the greatest wealth-building assets, it is also the foundation of family and financial security.
Below are more specific details on why it is absolutely worth the effort.
Black homeownership helps build wealth for generations
Looking back now, how history has influenced the present, early black Americans had great challenges in purchasing land and homes in the United States. And unfortunately, this has impacted how easy it is to leave a legacy for future generations.
Passing through the house is just one way black families can begin to build wealth for generations. Without a home as a major asset, each generation must find other ways to gain enough wealth to leave their children.
Owning a home offers financial options
A home can be your main vehicle for building wealth, increasing and tracking your net worth. And net worth is a worthwhile goal to improve.
But sadly, single black women have one of the lowest rates when it comes to net worth. How can I change this? One way to bridge this racial wealth gap is to invest in real estate.
So, what is the appeal of being a first-time home buyer? Well, one can build home equity that can offer more financial options in the future. And you can use this fairness in many ways.
Perhaps to pay off debt, increase savings, or invest? Current homeowners can even buy new homes of greater value.
Another way to increase your net worth is to maintain your home and value it. Its value increases over time. With this in mind, homes become one of the greatest ways to create wealth.
Homes provide safety and community
The benefits of homeownership are even further. Owning your own home is important to your family as well as providing the foundation for wealth buildings.
A home is a safe space for families to grow and the foundation of a community. A neighborhood filled with homeowners rather than tenants, takes pride in its property and local community.
Black homeownership statistics
So let’s look at the numbers and percentages to see how homeownership, income, and other factors affect Black Americans.
Percentage of Black Americans who own homes
Recent data from Census.gov reveals some information about Black homeownership statistics.
- In the US, black or African American homeowners accounted for only 7.9% of the population, while black renters accounted for 18.8%.
- White households reached a 73.1% homeowners, with 50.2% renters.
- Another biggest category of homeowners was 10.5% Hispanic Americans, and Asian Americans were 4.7% for homeownership.
This list reveals a major difference in homeownership. Compared to black families and other races, there is a much higher proportion of white families owning homes.
Furthermore, the amount of households with black renters is much higher than households owning their homes.
The data is the source of concern, but we’ll explain how to improve these statistics for Black Americans. Let’s take a look at other factors that affect homeownership rates.
Income and other factors
Income affects our daily lives. Therefore, it is important to know about income statistics.
According to Census.gov and their chart on true median household income, Black Americans earn an average of $52,860 per year.
The average salary is around $53,000, so depending on the situation and location, it can be difficult to buy a mortgage. According to the bank rate, the salary is around $4,400 before taxes, with a median monthly mortgage payment of more than $2,200.
The location also shows differences in black homeownership statistics.
For example, according to the National Association of Realtors (NAR):
- The states with the highest black homeownership rates are South Carolina, Mississippi and Delaware.
- North Dakota, South Dakota and Alaska had the lowest rates.
- Homeownership is rated above 44% in 16 states, including Washington, D.C.
Why Black Homeownership Statistics are disproportionately low
However, black homeownership statistics are still very low. why? Let’s take a closer look at housing equity and the factors that contribute to the disproportionateness of home ownership among Black Americans.
Lending bias and interest rate gaps affect opportunities for black home buyers
Housing discrimination is a practice that hinders the ability to rent or buy a home. It also prevents people from getting mortgages and other housing-related activities. Discrimination is based on race, religion, gender, and other discrimination factors.
Redlining was a form of mortgage discrimination or bias. Lenders were able to refuse mortgages to people living in areas with dense African American populations.
The Fair Housing Act was passed in 1968 to make such practices illegal. Other efforts have been made to cancel these years of discrimination in the housing market, including Mortgage Disclosure Act data that promotes transparency in lending.
However, the impact of these practices remains. Even today, they still have an impact on homeownership rates.
Another form of discrimination against home buying is interest rate disparities.
According to housing issues, black homeowners are charged higher interest rates than mortgage companies on average than mortgage companies due to risk-based pricing with credit-to-loan-value ratios.
Additionally, African Americans are more likely to be denied a loan. Statista shows the highest mortgage refusal rate from 2019 to the third quarter of 2023.
One reason for this is that you may be missing information from first-time home buyers. Black mortgage applicants are not always aware of the various programs that exist to help them become homeowners. And this continues to put black families at a disadvantage when it comes to getting loans.
Something else that affects black homeownership statistics is that black American households also have higher debt than other ethnic groups. Specifically, along with the student debt crisis.
According to Bankrate, black students take away most student loan debt when they complete their bachelor’s degree. Bankrate also explains that this will have a major impact after graduation.
Four years after graduating from university, black students have almost twice the amount of student loan debt that white students have. However, this is mainly due to the difference between accruing interest and borrowing graduate school money.
Debt directly affects home purchase. why? If you have too much debt, your lender may refuse to apply for a mortgage because of default risk.
Debt makes it difficult to get the money needed to buy a home.
Furthermore, the wage gap between minorities and women also negatively affects their ability to pay off debt. Again, this makes it even more difficult for black borrowers to get a mortgage.
Lack of access to capital for down payments
When you buy a house, you need to put capital as a down payment on the property. Usually, this means saving fiercely to create this down payment for your future home. But your ability to save enough depends on how much you earn.
And this is another area where Black Americans are at a disadvantage. According to McKinsey Research, the median annual wage for all US workers is $42,000, while 43% of black workers earn less than $30,000 a year.
Furthermore, many families live their paychecks to pay, and they can’t even save an emergency. One study found that most Americans have less than $1,000 in savings.
result? Some people struggle to make enough money to save on the down payment of their home.
Expert Tip: Don’t be discouraged, you can own a home
With all the negative statistics about homeownership for black people, it can be disappointing to think about owning it in a home, but that’s possible and black homeownership is on the rise.
That said, it’s important to start saving for the down payment of the home you need, depending on where you buy and the type of mortgage you qualify as a first-time home buyer. Remember, a down payment on a home is usually a huge expense, but there are other costs and fees to save you.
When I was considering purchasing a home, I also considered HOA fees, property taxes, and maintenance costs. These are part of homeownership, so make sure to consider them on your budget before purchasing a home. Also, once you buy a home, you need to consider the cost of travel.
Steps to improve black homeownership statistics
Work ongoing continues to level the differences in homeownership rates between blacks and whites. But in the meantime, there are ways to make homes more affordable. Let’s take a look.
Focus on receiving financial education
First, we will focus on the fundamentals of financial literacy, including income budgets. Budgeting means saving, reducing debt, investing in the future and creating plans to pay bills.
Need Help? Check out the Clever Girl Finance roadmap. You can also take advantage of the completely free personal finance course.
Work to reduce debt
As we discussed, debt affects your ability to buy and maintain a home.
So, before you buy a house, you work to reduce your debt using tactics such as the debt snowball method. Ideally, there’s zero, but if not, try paying back as much as possible.
The lender will assess your debt-to-revenue ratio. They want to know how much you earn each month and how much it will cost to pay off your debts. It will help them determine your ability to make your monthly payments.
Therefore, if you have too much debt compared to your income, you will reduce your chances of getting a loan approval. Or it may mean that you cannot rent as much as you need to rent a home that has your eyes on.
If this is a problem for you, consider these debt reduction strategies to attack your debt.
Start prioritizing your savings (not just down payment)
Now that we’ve discussed Black homeowner statistics, we’ll take steps to ensure your financial future before you buy a home. Saving money for emergencies and retirement is necessary for financial security. So prioritize this before you think about saving your down payment.
But saving on a tight budget can be challenging, so a small start won’t hurt. Every little contribution you make is a step in the right direction and ultimately sums up. Once you save money due to an emergency and put in your money for retirement, start saving for a down payment of your home.
Improving your credits
Unless you are a cash buyer, you will need to take out a mortgage to buy the property. Credit plays an important role in getting a mortgage.
If your credit score is low, improving it will increase your chances of getting loan approval. Better yet, you qualify for a better interest rate loan.
So, what does your credit score include? Lenders may consider several factors, including credit usage, payment history, and credit history length, as well as other factors such as credit mix.
Before applying for a mortgage or other types of loans, it is essential to know how your credit works and how these factors affect your credit score. From here you can monitor your credits regularly and take the necessary steps to improve your score.
Investigate mortgages and lending processes
It’s important to know what to expect from a real estate transaction. The loan application and mortgage process involves many documents.
Keep an eye on the steps you need to take before purchasing a home, and how many homes you can afford to buy comfortably.
According to Rocket Mortgage, you need to have information about your work history and what you earn, your trust and more. They also explain that the process includes pre-approval, approval letters and home offers.
Additionally, find out what the cost of the median home is where you want to live. There are many other costs besides typical home prices, such as home assessment/inspection, furniture costs.
What is the racial homeownership gap?
The racial homeowner gap refers to the differences between homeowners by race. For example, there is a huge gap between the number of white and black homeowners in the United States.
According to the US Treasury Department, as of 2022, white homeowners had a homeownership rate of 75%, compared to 45% of black homeowners.
What are the barriers to homeownership in minorities?
Barriers for minority home buyers include lender biases related to higher interest rates.
Additionally, income is also a factor as potential homeowners are unable to save large amounts of down payments due to their low income. Black Americans earn less on average, making saving difficult.
These factors can be daunting, but together we can all advocate for fair mortgage practices.
Additionally, budgeting and consistent savings can help you prepare financially for your home.
What are the benefits of black homeownership?
Some of the benefits include the ability to build your home as business, especially with home improvements, over time, and the option to earn rental income if necessary.
The home also provides you with security. When your home is paid, it gives you a permanent place to live and contributes greatly to your net worth.
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Black homeownership is within reach
The statistics do not seem to be promising. But the truth is that homeownership is still achievable for black families. Being a first-time buyer is a great goal. Owning a home will provide a legacy to future generations and help lay the foundation for intergenerational wealth.
So, if your ultimate goal is to buy your home, don’t scare you by black homeownership statistics. The right education and tools can close the gap between black homeownership.
What’s next? If you’re ready to buy your first home, check out our free first home buyer course. You’ll start on the right path!