The truth is that many problems contribute to low black homeownership statistics and homeownership rates. Yes, inequalities and racial disparities exist in the housing industry. But improving the black homeownership rate is still important, necessary, and attainable. Let’s take a look at the statistics and what we can do about them.
Why is black homeownership so important?
Becoming a black homeowner and understanding black homeownership statistics is about more than just a home purchase. It’s about laying a foundation for building generational wealth. In addition to being one of the biggest wealth-building assets, it’s also the base for family and financial security.
Here are more specific details about why it’s absolutely worth striving for.
Black homeownership helps build generational wealth
Looking back now at how history is affecting the present, early Black Americans had tremendous difficulty purchasing land and homes in the United States. And unfortunately, this has impacted how easy it is to leave a legacy to future generations.
Passing down a home is just one way that black families can begin to build generational wealth. Without a house as a key asset, each generation must find other ways to acquire enough wealth to leave to their children.
Owning a home provides financial options
A home can be your main vehicle for building wealth and increasing and tracking your net worth. And net worth is a goal worth improving.
But sadly, single black women have one of the lowest rates when it comes to net worth. How can this be changed? One way to close this racial wealth gap is by investing in real estate.
So, what’s the draw of being a first-time homebuyer? Well, for one, you can build home equity which can provide you with more financial options in the future. And you can use this equity in numerous ways.
Perhaps to pay off debt, increase your savings, or invest? Current homeowners can even buy a new home of greater value.
Another way to increase your net worth is to keep your home so it appreciates in value. Its value will increase over time. With this in mind, a home can be one of the greatest methods of wealth creation.
Homes provide safety and community
The benefits of homeownership go further. Not only does owning your own home provide a foundation for wealth building, but it’s also important for families.
A home is a safe space where families can grow and is the cornerstone of communities. A neighborhood filled with homeowners rather than tenants will have pride in their property and the local area.
Black homeownership statistics
Now, let’s examine 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 United States, Black or African American homeowners accounted for only 7.9% of the population, while black renters accounted for 18.8%.
- White households reached a percentage of 73.1% homeowners, with renters at 50.2%.
- The other largest categories of homeowners were Hispanic Americans at 10.5% and Asian Americans at 4.7% for homeownership.
This list reveals significant differences in homeownership. There is a much higher percentage of white families who own their homes compared to black families as well as families of other races.
In addition, the amount of black renter households is much higher than those that own their home.
The data is cause for concern, but we will discuss ways to improve these statistics for Black Americans. Let’s take a look at other factors that affect homeownership rates.
Incomes and other factors
Income affects our everyday lives, including how high of a mortgage payment we can afford. Because of this, it’s crucial to know about income statistics.
According to Census.gov and their chart about real median household income, Black Americans make an average of $52,860 per year.
An average salary of approximately $53,000 may make it difficult to afford a mortgage, depending on circumstances and location. This salary is approximately $4400 a month before taxes, and the median monthly mortgage payment is over $2200, according to Bankrate.
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.
- Including Washington DC, 16 states rated homeownership as higher than 44%.
Why black homeownership statistics are disproportionately low
But black homeownership statistics are still incredibly low. Why? Let’s take a closer look at housing equity and the factors that contribute to the disproportionately lower rate of homeownership for Black Americans.
Lending biases and interest rate disparities impact opportunities for black homebuyers
Housing discrimination is a practice that impedes the ability to rent or buy housing. It also prevents people from getting a mortgage or other housing-related activities. Discrimination is based on race, religion, sex, and other identifying factors.
Redlining was a form of mortgage discrimination or bias. It allowed lenders to deny mortgage loans to people living in areas that African Americans densely populated.
The Fair Housing Act was passed in 1968 to make such practices illegal. Other efforts have been made to undo these years of discrimination in the housing market, such as the Home Mortgage Disclosure Act data, which promotes lending transparency.
However, the effects of these practices still exist. Even today, they still impact homeownership rates.
Another form of home-buying discrimination is the disparities in interest rates.
According to Housing Matters, black homeowners on average are charged a higher interest rate by mortgage firms than white homeowners due to risk based pricing with credit and loan-to-value ratios.
Additionally, African Americans are more likely to be denied a loan. Statista shows that black households have the highest denial rates for mortgages from 2019 to quarter 3 of 2023.
One reason for this may be a lack of information for first-time homebuyers. Black mortgage applicants may not always be 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 acquiring lending.
Something else that affects black homeownership statistics is Black American households also have higher debt than other ethnic groups. Specifically with the student debt crisis.
Black students take out the most student loan debt, according to Bankrate, when getting a bachelor’s degree. Bankrate also explains that this has quite an impact following graduation.
Four years after finishing college, black students have nearly double the quantity of student loan debt that white students have. However, this is mainly due to the differences in interest accrual and borrowing money for graduate school.
Debt directly affects home buying. Why? Too much debt could mean lenders decline your mortgage application due to the risk of default.
Debt makes it hard to gain the funding required to buy a home.
Additionally, wage gaps for minorities and women also negatively impact your ability to pay off debt. Again, this makes it more difficult for black borrowers to get a mortgage.
Lack of access to capital for a downpayment
When you buy a home, you need to put down capital as a down payment for the property. Usually, this means saving hard to create this down payment for your future home. But the ability to save enough depends on how much you earn.
And this is another area where Black Americans are at a disadvantage. The annual median wage of all US workers is $42,000, but 43% of black workers earn less than $30,000 per year, according to McKinsey research.
In addition, many families live paycheck to paycheck, unable to even save for emergencies. One study found that most Americans have less than $1,000 in savings.
The result? Some people struggle to earn enough to save for the down payment of a home.
Expert tip: Don’t be discouraged, you can own a home
With all the negative statistics around black homeownership, it can be discouraging to think about owning it a home but it is possible and black homeownership is rising.
That said, it’s important to start saving for your any required home downpayment depending on where you plan to buy and the type of mortgage you qualify for as a first-time homebuyer. The down payment for a home is usually a large expense, but don’t forget that there are also other costs and fees to save up for.
When I was considering a home purchase, I also thought about HOA fees, property taxes, and maintenance costs. These are part of homeownership, so be sure to consider them in your budget before looking to purchase a house. You’ll also need to consider moving costs once you purchase your home.
Steps to improve black homeownership statistics
Ongoing work continues to level the difference between black and white homeownership rates. But in the meantime, there are ways to make housing affordability more likely. Let’s take a look.
Focus on getting financial education
First, focus on financial literacy basics, including budgeting your income. Budgeting means creating a plan to save, reduce debt, invest for the future, and pay bills.
Need some support? Check out our Clever Girl Finance Roadmap. You can also take advantage of our completely free personal finance courses.
Work to reduce debt
As we’ve discussed, debt impacts your ability to purchase and maintain a home.
So before buying a home, work to reduce your debt using a tactic like the debt snowball method. Ideally, you’ll have zero, but if not, try to pay down as much as possible.
Lenders evaluate your debt-to-income ratio. They want to know how much you earn each month and how much of that goes towards paying down your debt. It helps them determine your ability to make your monthly payments.
So, if you have too much debt compared to your income, this could reduce your likelihood of getting approved for a loan. Or it could mean you cannot borrow as much as you need for the home you have your eye on.
If this is a problem for you, consider these debt reduction strategies for attacking your debt.
Begin to prioritize savings (not just for a down payment)
Now that we’ve discussed black homeownership statistics, take steps to secure your financial future before buying a home. Having money saved for emergencies and retirement is necessary for financial stability. So, prioritize this before thinking about saving for a down payment.
But saving on a tight budget can be difficult, so there’s no harm in starting small. Every little contribution you make is a step in the right direction, which eventually adds up. Once you’ve saved for emergencies and put money toward retirement, start saving for a house down payment.
Improve your credit
Unless you’re a cash buyer, you must take out a home loan to buy a property. And credit plays a significant role in getting a home loan.
If your credit score is low, improving it will increase your chances of getting approved for a loan. And better yet, you’ll be eligible for loans with better interest rates.
So, what does your credit score include? Lenders will likely look at several factors, such as your credit utilization, payment history, and credit history length, in addition to other factors like credit mix.
Before applying for a home loan or any other type of loan, it’s essential to know how credit works and how these factors impact your credit score. From here, you can regularly monitor your credit and take the necessary steps to improve your score.
Research the mortgage and lending process
It’s important to know what to expect in a real estate transaction. Loan applications and the mortgage process involve a lot of paperwork.
Be aware of the steps you’ll need to take before purchasing a home, as well as how much house you can comfortably afford to buy.
According to Rocket Mortgage, you’ll need to have information about your job history and what you earn, your credit, and more. They also explain that the process includes a preapproval, an approval letter, and making an offer on a home.
In addition, find out what the cost will be for a median-priced home where you’d like to live. Numerous costs are involved besides the typical home price, including home appraisal/inspection, the cost of furniture, etc.
What is the racial homeownership gap?
The racial homeownership gap refers to the differences between homeownership by race. For instance, there is a large gap between the number of white homeowners and black homeowners in the United States.
As of 2022, the homeownership rate for white homeowners was 75%, compared to 45% for black homeowners, according to the U.S. Department of the Treasury.
What are the barriers to homeownership for minorities?
Some of the barriers for minority home buyers include lender biases tied to higher interest rates.
In addition, income can also be a factor, as lower incomes do not allow potential homeowners to save up a large down payment. Black Americans on average have lower incomes, making saving difficult.
These factors can be daunting, but together, we can all advocate for fair practices with mortgages.
Furthermore, budgeting and consistent saving can help with being financially prepared for a home.
What are the benefits of black homeownership?
Some of the benefits include the ability to build wealth over time with your house as an asset, especially with home improvement, and the option to make rental income if you want.
A house also provides you with security. Once your home is paid for, it gives you a permanent place to live and contributes significantly to net worth.
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Black homeownership is within reach
The statistics may not seem promising. But the truth is that homeownership is still attainable for black families. Becoming a first-time buyer is an excellent goal to have. Owning a home provides a legacy to future generations and helps build the foundation for generational wealth.
So, if your ultimate goal is to purchase your home, don’t let black homeownership statistics scare you. We can and will close the black homeownership gap with the right education and tools.
What’s next? If you’re ready to purchase your first home, check out our free first-time home buyers course and you’ll be starting on the right path!
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