Minority Homeownership Rates Increased at the end of 2019

Minority homeownership experienced a small, but much welcomed uptick at the end of last year. The Census Bureau’s Housing Vacancies and Homeownership survey reported that minority homeownership had an overall increase of 48.6% in the fourth quarter of 2019, up 0.8 percentage points from the fourth quarter of 2018.

Though there was an increase across the board for African American, Hispanic, Asian, Native American and Pacific Islander homeowners at the end of 2019, homeownership for Black Americans experienced the largest improvement. The US Census reported that the percentage of black homeowners rose from 40.6% to 43.3% near the end of 2019.

While this increase is a good sign, it’s important to look at it in context. Prior to this increase, the census reported that homeownership amongst Black Americans had fallen to 40.6% in early 2019, making it the lowest it had been since 1950 when it was at 34.5%”. The National Association of REALTORS® (NAR) found (In PDF) that Black American homeownership has remained below 41% since 2016.

NAR also reports that the homeownership rate for Hispanic Americans has consistently remained above 45% between 2016 and 2019. Asian American homeownership has also stayed above 53% over the same time period.

According to Bankrate, the average 30-year fixed rate mortgage “started 2019 at 4.68% and steadily declined before closing out the year at 3.93%”. To give you an idea of how significantly low 2019 rates were, compare them to 2000 when the average rate for homeowners was 8.5%.

The reduced monthly payment that low rates deliver may be helping to increase minority homeownership. Especially when you consider that the burden of student loan debt has been one of the biggest obstacles facing the latest generation of minority homebuyers.

The Washington Post article “For many black millennials, student debt is the biggest hurdle in homeownership” states, “Nearly 85% of blacks who graduated with bachelor’s degrees in 2016 carry student debt, compared with 69% of whites with bachelor’s degrees, according to the Center for Responsible Lending, a consumer-advocacy group”. The nonprofit organization also found that the average black student loan borrower owes more than white student borrowers.

A lower mortgage payment means that prospective homeowners may be able to afford both a new home and student loan payments – making the dream of homeownership more attainable.

The increasing use of Artificial Intelligence (AI) technology in the mortgage industry may be helping to level the playing field for minorities. Forbes shares that the “Consumer-lending Discrimination in the FinTech Era” study by the National Bureau of Economic Research discovered that there was a link between the increase in digital mortgage offerings and the decrease of mortgage discrimination.

“Black and Latino homebuyers currently see an interest rate that’s 0.079% higher on average than other borrowers. Altogether, Black and Latino homeowners pay about $765 million in additional interest per year as a result”. However, when Black and Latino homebuyers used online loan applications to purchase a home they paid .026% less than those who applied in person.

Organizations like The National Association of Real Estate Brokers (NAREB), a real estate trade group dedicated to uniting minority professionals in the real estate industry, have been working hard to promote democracy within the housing industry. One of NAREB’s accomplishments in 2019 was to publish an eye opening report (in PDF) about the state of housing for Black Americans in 2019. They also empower their members with the tools necessary to campaign for legislation that will empower minority homeowners.

Another example of an advocacy focused group is the National Association of Hispanic Real Estate Professionals (NAHREP), an organization whose goal is to advance sustainable Hispanic homeownership. NAHREP has been an important voice for Hispanic homeowners in 2019, working to push forward legislation like Homeownership for Dreamers Act in order to empower Latino homebuyers.

NAR announced the passage of a new Fair Housing Action Plan designed to ensure America’s 1.4 million Realtors® are doing everything possible to protect the rights of people of all backgrounds to purchase, own, and transfer ownership of property in America.

We still have a long way to go when it comes to increasing minority homeownership. But three catalysts – low mortgage rates, AI based loan technology and legislative advocacy – should continue in 2020.

Experts believe mortgage rates will remain low in 2020. Fannie Mae, Freddie Mac, the Mortgage Bankers Association and NAR, all predict that mortgage rates will end 2020 within a quarter of a percentage point of where they ended in 2019.

The use of AI will also continue to increase across the lending industry.  Mortgage providers who want to process loans faster (and cheaper) will adapt machine-based loan approval systems. Systems that can process approval and assign percentage rates based on data, not skin color.

The advocacy work of 2019 will become more evident as we get further into 2020. For example, NAR spent a good part of last year advocating for legislative changes that would address the affordable housing shortage. An issue that has contributed to keeping 1.7 million black millennials, with the necessary income and credit, from purchasing a home. The Yes In My Backyard (YIMBY) (in PDF), legislation that NAR campaigned strongly for in 2019, passed the House of Representatives without any opposition in March of 2020.

The Street.com article “2020 U.S. Real Estate Predictions” includes a prediction by Realtor.com  analysts that “Hispanic Americans will gain more wealth from home equity than white Americans for the first time ever”. Realtor.com points out that home values in Hispanic neighborhoods are increasing at a higher rate than white neighborhoods. Especially in areas like Texas, which they refer to as an “Hispanic homeowner hotspot”.