As the first quarter of 2021 nears its end, a recent Redfin report shows both good and bad news for Black homeowners.
The positive: Homeowners in primarily Black neighborhoods earned an average of $59,000 in home equity in 2020, compared with $50,000 for homeowners in primarily white neighborhoods between 2019 through January 2021. That $59,000 gain represents a median home equity increase of 197%.
The negative is that even with the uptick, homeowners in primarily Black neighborhoods on average still report only $89,000 in equity, compared to $113,000 for Americans in white neighborhoods.
That $89,000 is the lowest median equity among the four races represented in the Redfin study, as homeowners in primarily Asian neighborhoods reported $257,000 in median equity and homeowners in primarily Hispanic neighborhoods reported $102,000 in median equity.
Homeowners in primarily Black Neighborhoods also started with less equity than Asian ($178,000), Hispanic ($35,000) and white ($63,000) homeowners in 2019, prior to the outbreak of COVID-19, Redfin said.
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The equity gap may be narrowing between Black and white homeowners, though.
In 2019, the typical homeowner in a primarily white neighborhood had $33,000 more home equity than the typical homeowner in a primarily Black neighborhood. By 2021, that number shrank to $24,000.
“Significant gains in home values fueled equity gains from 2019 to January 2021 for homeowners of all races,” the press release stated. “The difference in equity in 2019 was primarily driven by the fact that Black homebuyers made smaller down payments than buyers of other races, due to lower home prices and putting down a smaller percentage of the sale price.”
(Redfin noted that in the report, a neighborhood is considered primarily one race or another if more than 50% of the owner-occupied households are Black, Hispanic, Asian or white, as identified in the U.S. Census Bureau’s American Community Survey. The brokerage calculated home-equity gains throughout 2020 for each neighborhood type for homeowners who purchased a home anytime during 2019, using January 2021 Redfin Estimates as a proxy for current market value. The terms “Black homeowner,” “white homeowner,” etc. were used in the report to refer to a person who bought a home in a neighborhood of primarily one race or another in 2019.)
In the predominantly Black areas of Chicago, people who bought homes experienced an enormous percentage equity gain of 750% from 2019 to January 2021. Newark and Washington, D.C., also saw huge equity increases for Black homeowners of 626% and 425%, respectively.
Redfin Chief Economist Daryl Fairweather said home values will continue to rise in 2021 as Americans remain interested in relocating and buying homes. Whether or not this impacts Black homeowners enough to make a statistical difference remains to be seen.
“Less than half of Black Americans own the home they live in, so most of the Black community didn’t benefit from the enormous wealth homeowners have gained in the past year,” Fairweather said. “Especially compared with the three-quarters of white Americans who own their homes, the total benefit for Black families across the country is relatively small. With higher unemployment rates and less overall wealth, Black families were not as likely as white families to buy homes even when prices were comparatively low.”
The disparity in white and Black homeownership has been well-documented, with the U.S. Census Bureau reporting white homeownership at a nine-year high in the fourth quarter of 2020. Black homeownership, meanwhile, had dropped to 44.1%.
Even record-low mortgage rates during the pandemic couldn’t do much to buoy the number of Black homeowners, largely due to low inventory and the crumbling jobs economy that came with virus.
“Now that prices are so high and the pandemic has contributed to high unemployment, especially for Black workers, it’s even more difficult for people who don’t already own homes to break into the housing market,” Fairweather said. “There is a major need and a big opportunity for policymakers to enact programs like down-payment assistance and zoning reform to help narrow the homeownership gap and enable more Black families to build wealth through home equity.”
Home prices were up 14% year over year in January, and the total combined value of homes nationwide has risen by more than $2 trillion since the COVID-19 pandemic began.