The mortgage rejection rate for black applicants is 84% higher than for white applicants, according to data from Zillow in 2020, the largest year for which data was available. This is an increase from 2019, when the refusal rate was 74% higher.
Are we surprised? No, but it’s still frustrating as can be? Yes
According to Zillow, 19.8% of black applicants have been denied a mortgage, which is the highest for any racial group and 9 percentage points higher than whites. The states with the highest rates were Mississippi (31%), Louisiana (26.1%), Arkansas (26%) and South Carolina (25.8%).
It sounds like the problem Airbnb has with hosts who deny the potential Black guests because of the pronunciation of their name.
Overall black ownership is up 44%, but still below peaks reached in the early 2000s. The highest was 49.7% in 2004.
Households of color, as well as renters and low-income households, were more likely to report encountering housing and economic challenges due to the pandemic. Black households were more likely than white households to report job or income loss and difficulty meeting mortgage or rent payments. This disproportionate impact of the pandemic on black households has stalled efforts to close gaps in access to credit, homeownership, home values and mortgage denial rates, making the path to equity even slower than it already was.
Before Zillow Search shows that black renters have a bigger hurdle to jump when saving for a down payment, primarily due to income inequality. Black home buyers in 2020 had a median income of $67,000, compared to an overall median of $83,000 for all applicants. This may help explain why black mortgage applicants had lower down payments in 2020 than applicants of other races. Black applicants have deposited a median of 3.5% on home purchase applications, barely above the absolute minimum of 3% required for most conventional loans, and less than half the median down payment overall 8.9% of all applicants.
We already knew that the coronavirus pandemic has disproportionately affects blacks in terms of health. But this study also sheds light on how the pandemic has disproportionately affected black people economically.
The study also found that black candidates are buying homes for less than any other race. In 2020, the median property value was $225,000 for black applicants and $275,000 for all other applicants. According to Zillow, black applicants’ deposits were $16,600 lower than the overall median deposit in 2020.
The research claimed that it could take another decade for black applicants to have the same down payment as all applicants.
Ten years?! This shows how big the disparity is between blacks and other races when it comes to home ownership. Assuming the proper effort is put in place to ensure that this gap decreases.
More from Zillow on how poor credit affects mortgage denials:
Access to traditional financial services is another source of the large gap 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 turned down based on their credit history, the cause of more than 6% of black mortgage applicants. a third (37%) of all black mortgage rejections. The relative lack of traditional financial services in predominantly black communities (as well as in predominantly Latino communities) is a significant factor in the large gap in credit history among black applicants. A higher prevalence of non-traditional services (payday loans, etc.) and fewer traditional services (such as banks) contribute to poor credit health entire communities, especially communities of color.
Bad credit equals bad home ownership.
While all of this data may seem negative, there are some positives to take from this study.
According to Zillow, the value of black-owned homes is rising, in fact, 1.5 percentage points above all home values and is expected to rise at a rate of 0.8 percentage points above all home values. homes by September 2022.
Yet it will also take more than two decades for black home values to reach the overall median.
More from Zillow:
Part of this problem revolves around disparities in home valuation, including property tax assessments and rates, which often skew against homeowners of color and/or largely non-white neighborhoods. Black houses and houses in black neighborhoods are often valued at lower values, corn tax contributions are higher than they should be. This results in black homeowners receiving less than they should in sales and paying more than they should in taxes, further widening the wealth gap.
While there have been advancements in Black home ownership in recent years, there are still many housing equity challenges. Homeowners have seen a plethora of housing gains during the pandemic, but the growing disparity between black and white homeownership rates and home values paints a picture of who those winners really are. While credit borrowers as a whole are stronger than ever, the credit access gap is widening along racial lines. Policies and interventions that target the barriers preventing Black Americans from owning a home are essential to achieving housing equity. Closing the credit and finance access gap is a good way to get more black renters on the path to homeownership.
We already knew that the black homeownership gap was small crelative to other demographics in the United States. But what this study has shown is that it will take tremendous work and effort to ensure fairness between black homeowners and all other groups.