According to data from Zillow in 2020, the year the data has been available the longest, the mortgage refusal rate for black applicants is 84 percent higher than for white applicants. This is an increase from 2019, when the rejection rate was 74 percent higher.
Are we surprised? No, but it’s still frustrating as hell? Yes
According to Zillow, 19.8 percent of black applicants were denied a mortgage, which is the highest for any racial group and 9 percentage points higher than white people. The states with the highest rates were Mississippi (31 percent), Louisiana (26.1 percent), Arkansas (26 percent), and South Carolina (25.8 percent).
Sounds similar to the problem Airbnb has with hosts denying potential Black guests because their name sounds.
Total black ownership has risen to 44 percent, but it’s still below the highs it reached in the early 2000s. The highest value was 49.7 percent in 2004.
More of Zilov:
Households of color as well as tenants and low-income households reported encounters more frequently Housing and economic challenges because of the pandemic. Black households were more likely than white households to report job or income loss and difficulty keeping up with mortgage or rent payments. This disproportionate impact of the pandemic on black households has stalled efforts to close gaps in credit access, homeownership, home values and mortgage rejection rates, slowing the path to equity even more than it already was.
earlier Zillow Research shows that black renters face a major hurdle in saving for a down payment, largely due to income inequality. Black applicants had a median income of $67,000 in 2020, compared to an overall median of $83,000 for all applicants. This could explain why black mortgage applicants had lower down payments than applicants of other races in 2020. Black applicants have made a median of 3.5% on home purchase applications, just above the bare minimum of 3% required for most conventional loans and less than half of the total median down payment of 8.9% for all applicants .
We already knew that the coronavirus pandemic has Blacks are disproportionately affected when it comes to health. But this study also sheds light on how the pandemic has disproportionately affected black people economically.
The study also found that black applicants buy less expensive homes compared to other races. In 2020, the median home value was $225,000 for Black applicants and $275,000 for all other applicants. According to Zillow, black applicant deposits in 2020 were $16,600 less than the median total deposit.
The research claimed it could be another decade before black applicants received the same down payment as all applicants.
ten years?! That just goes to show how big the difference between blacks and other races is when it comes to home ownership. Assuming appropriate efforts are made to ensure this gap narrows.
More from Zillow on how bad credit affects mortgage rejection:
Access to traditional financial services is another cause of the wide disparity between down payments and access to mortgages. As in previous years, poor credit remained the most common reason for black mortgage denials in 2020 – more than 6% of black applicants were denied based on their credit history, accounting for more than a third (37%) of all denials is for black mortgages. The relative lack of traditional financial services in primarily Black communities (along with primarily Hispanic communities) is a major factor in the significant credit history gap for Black applicants. A higher prevalence of non-traditional services (payday lenders, etc.) and less traditional services (like banks) contribute bad credit entire communities, especially communities of color.
Bad credit equates to poor ownership.
While all of this data may seem negative, there are some positives to glean from this study.
According to Zillow, black-owned homes are rising in value by 1.5 percentage points more than all home values and are expected to rise at a pace of 0.8 percentage points above all home values through September 2022.
Still, it will also take more than two decades for the value of black homes to reach the overall median.
More from Zillow:
Part of this problem revolves around differences in home valuations, including appraisals and property tax rates, which are often unfavorable to homeowners from black and/or largely non-white neighborhoods. Black houses and houses in black neighborhoods are often rated with lower values, but Tax bills are higher than they should be. This results in black homeowners receiving fewer sales than they should and paying more in taxes than they should – further deepening the wealth gap.
While there have been advances in black homeownership in recent years, many housing equity challenges remain. Homeowners have seen a plethora of home gains during the pandemic, but the growing disparity between black and white homeownership rates and home values paints a picture of who those winners actually are. While borrowers as a whole are now stronger than ever, the gap in access to credit is widening along racial lines. Strategies and interventions that target the barriers that prevent Black Americans from owning their homes are key to achieving housing equity. Closing the credit and financial access gap is a good way to get more black renters on the homeownership journey.
We already knew that the black homeownership gap was small ccompared to other populations in the United States. But what this study has shown is that it will take an extreme amount of work and effort to ensure there is justice between Black homeowners and all other groups.