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About Half of Black Renters Were Priced Out of Homeownership in the Past Year

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In the span of a single year, more than half of all Black renters have been priced out of becoming homeowners.

The toxic combination of record-high home prices and higher mortgage interest rates has made the dream of homeownership unattainable for about 52% of Black renter households, according to a recent report from the Joint Center for Housing Studies at Harvard University. That’s compared with about 44% of renters of all races who have been priced out of buying homes.

And the problem appears to be getting worse.

“Black renter households have lower incomes, and that’s going to affect how much [they] can pay for housing costs,” says Raheem Hanifa, the research analyst who wrote the report. “If interest rates and home prices continue to rise, you would expect more Black renter households to not be able to afford homeownership.”

The report looked at median home prices and mortgage rates from April 2021 to April 2022. Since then, prices and mortgage rates have continued to rise, making homeownership increasingly unattainable.

Just 6.9% of Black renters, or just under 600,000 of Black renter households, could afford to purchase a home in April of this year, according to the report. Last year, more than 1.2 million households could have swung it. However, roughly 26.3% of Asian renters, 14.9% of white renters, and 10.3% of Hispanic renters could afford to buy a median-priced home this year, according to the report.

Hispanic buyers were hurt nearly as much as Black buyers, as 50% fewer could afford homeownership this year compared with last.

There’s a financial cost to not becoming a homeowner. Renters can’t lock in their housing costs over the long term and build wealth over time that can be tapped in an emergency or passed on to future generations.

“Once you buy a home and you have a fixed-rate mortgage, then your monthly mortgage payment will be consistent,” says Hanifa. That’s a different experience for renters, who are seeing rents spike around the country. “As a renter, the amount that you pay is up to your landlord and the larger market dynamics.”

Lower mortgage rates at the outset of the COVID-19 pandemic made higher home prices more palatable to buyers, since they kept monthly housing payments down. But when rates spiked this spring at the same time that prices kept hitting new heights, many buyers were simply priced out of the market.

In April of last year, households needed to earn at least $79,570 to afford a median-priced home of $340,700, according to Joint Center data. This year, renters needed to make at least $107,500 to buy a $401,700 home. (This includes a 3.5% down payment, mortgage insurance, property taxes, and closing costs on a national basis.) The result was about 4 million fewer renter households were unable to buy homes.

Black households earned nearly $46,000 in 2020—compared with $67,500 for all races, according to U.S. Census Bureau data.

They’re also less likely to receive assistance from family members. Prior generations suffered from racist housing policies such as redlining, which prevented communities of color from receiving loans and buying homes in more desirable areas. More recently, many Americans were hurt by practices such as receiving subprime mortgages in the run-up to the Great Recession and credit scores that don’t consider on-time rent payments.

“The effect of generations of racist housing policies [kept] Black families from being able to afford a home,” says Hanifa.

The post About Half of Black Renters Were Priced Out of Homeownership in the Past Year appeared first on Real Estate News & Insights | realtor.com®.

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