The Race for Homeownership
Ethnic minority groups are disproportionately barred from homeownership; new study examines the consequences
A recent report by real estate listing website Zillow.com reveals that minorities face unequal access to housing. Results show that different races have different experiences when seeking a mortgage, buying a house and owning a home.
The report, “A House Divided: How Race Colors the Path to Homeownership,” details the issues of low minority homeownership and its impact on society.
Since people of black and Hispanic descent, on average, have lower incomes and credit scores than their white counterparts, they tend to put down smaller down payments, and they are more likely to be denied for mortgage loans than whites.
This leads to low homeownership rates in black and Hispanic communities.
Despite comprising 12.1 percent and 17.3 percent of the American population respectively, blacks and Hispanics only make up 2 percent and 4.5 percent of the successful mortgage applications, the report shows.
After the housing bust, Hispanic minority communities were hardest hit. Svenja Gudell, director of economic research at Zillow.com, says, “If home values in certain minority-dominated areas are slower to recover, it will take longer to build the equity necessary to make improvement to the housing stock and reinvest in the local community.”
This could keep certain neighborhoods in a vicious cycle, since plunging house values are followed by low rates of homeownership.
For those in poor financial shape, Gudell suggests they seek out mortgages with lower down payments, such as FHA loans. FHA loans require 3 to 5 percent down payments, in comparison to most conventional loans with at least 20 percent down.
Minority homeowners also can look for government assistance programs that help them to understand how to increase their credit scores, Gudell says.
Renting could be a smarter choice until a homebuyer is financially comfortable and able to afford the cost of homeownership. Those who rush into buying can be left stretched too thin, he says.
However, there is a silver lining behind the severe collapse of the housing bubble. Hispanic communities have seen the fastest recovery compared to other ethnicities.
In addition, they are forecasted to see the best home-value growth over the next year.
Also, recently the conventional loan market has allowed more access for homebuyers with lower down payments. This trend will provide more options for minority homebuyers, Gudell says.
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