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Missed Opportunities: Addressing the Racial Gap in Homeownership, Equity

Redfin reports [1]that homeowners in primarily white neighborhoods gained an average of $70,000 more in home equity than those in predominantly African-American neighborhoods from 2012-2018.

Although home prices nationally have risen 73% since Q1 2010, homeownership rates among all Americans dropped 3% to 64.1%. The amount of white homeowners is at 73.1% in Q2 2019. 

Homeownership for African-Americans is at a record low of 40.6%, and 46.6% for Hispanic homeowners. Redfin states that the 32.5% difference in homeownership between white homeowners and those of minorities is 3.6% wider than it was at the beginning of 2010.

“With higher unemployment rates and less wealth to begin with, black Americans were less able to buy homes even when prices were at their lowest point, meaning many missed out on opportunities to build wealth and put down roots in their communities through homeownership," said Redfin Chief Economist Daryl Fairweather. "The growing racial homeownership gap has widened the wealth gap, as home equity remains one of the most significant wealth-building tools. And now, with higher home prices and tighter lending standards than before the housing crash of 2008, it's more difficult than ever for minorities to break into the housing market. That's likely to contribute to growing economic inequality in the U.S."

Redfin also stated that homeowners in African-American communities saw smaller gains in home equity, coming in at $120,800 from 2012-2018, when compared to Hispanic or white neighborhoods. Homeowners in primarily white neighborhoods saw a gain of $190,935 during the same period. Hispanic homeowners gained $206,000 in equity. 

Home prices in black neighborhoods rose 24.9% from 2012-2018, which is higher than the 21% gain in Hispanic communities and a 12.5% increase in white communities. 

Although home prices have risen in predominantly African-American communities, those increases have not resulted in a rise in net worth. 

The median net worth for African-Americans dropped 2.8% in 2016 to $17,100, which leaves the typical African-American more than $10,000 short of the necessary 20% down payment  needed to purchase a median priced home in Detroit —one of the most affordable cities in the U.S.