Zillow: Black home values still lag overall market although recent prices are improving

Zillow: Black home values still lag overall market although recent prices are improving

BCN Staff – Feb. 4, 2021 – Typical values for Black- and Latinx-owned homes still lag overall U.S. home values, but the gap is narrowing, according to West Coast real estate analytics firm Zillow.

Recent Zillow analysis released at the beginning of 2021 shows homes owned by Black and Latinx households are worth 16.2% and 10.2% less, respectively, than the typical U.S. home — gaps that have closed by about 4 percentage points from their widest points following the Great Recession.

Homes owned by non-Hispanic white and Asian families, meanwhile, have typical values 2.9% and 3.7% higher than the typical U.S. home. While inequity in home values continues to persist, the data show them steadily, albeit slowly, converging. Since homeownership is the single largest driver of wealth for many households, the value and appreciation of a home is extremely impactful for families.

Before the Great Recession, the gap between Black-owned home values and all home values was about 15%, but grew to 20% by March 2014. Similarly, Latinx-owned homes saw the largest home value gap in May 2012 at 14% — 2 percentage points larger than before the housing bubble. Now, nearly a decade later, home values for Black- and Latinx-owned homes are back at pre-bubble levels, and continue to narrow despite the current economic crisis.

“It has taken nearly a decade for the home value gap to return to pre-recession levels, but still, the gap remains very large,” says Zillow economist Treh Manhertz. “With Black and brown communities and jobs hit disproportionately hard in the pandemic, there has been reason to worry another dip may be on the horizon that could slow or stop the progress. However, this is not the case, as the same factors that widened the gap in the Great Recession are not surfacing this time.

“Thanks to rock bottom (interest) rates on the most secure mortgages, extended forbearance programs, and rising home prices, there are no signs of another widening of the gap coming this year. However, through these turbulent times, continued vigilance and targeted intervention by policymakers is crucial to keep the progress going for communities of color,” explained Manhertz.

One reason for the wide gap is that the housing bust hit communities of color especially hard. Subprime loans were targeted to take advantage of the most vulnerable communities, and the ensuing wave of foreclosures hurt homeownership and home values disproportionately for Black and Latinx homeowners. Fast forward 12 years, and homeownership rates and home values are still recovering for these communities. While home value growth turned positive for U.S. homes in August 2012, it took an additional two years for Black and Latinx homes to see this same growth.

Home value inequality varies greatly in different states and metropolitan areas. Large metros with the smallest spread between Black-owned home values are Riverside (1% value gap), San Antonio (3%), Las Vegas (3%), and Portland (4%). Among the most unequal are Detroit (46% value gap), Buffalo (43%) Birmingham (43%), St. Louis (41%), and Milwaukee (40%).

Black homeownership rates are also on the rise since the Great Recession, despite challenges for Black homebuyers to secure a mortgage. Telework has the ability to expand the opportunity for homeownership even further for Black and Latinx renters, providing the flexibility to own a home in a less-expensive area.

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Remote work opening up home ownership opportunities to black renters

Meanwhile, the rapid rise in pandemic-driven telework could make first-time homeownership most broadly accessible to black renters compared to other renters, based on factors including income, the makeup of local industries, geography and more, according to another Zillow report

Zillow research found that, of the nearly 2 million U.S. renters who are able to take advantage of heightened telework options and could afford monthly payments on homes in less-expensive areas outside of their current metros, Black renters benefit far more than other renters. In large metro areas where typical starter home values are higher than they are nationally, Black renters are 29% more likely than other renters to be able to buy their first home in a less expensive area because of the opportunity to work from home permanently.

Black renters have the most opportunity due to their likelihood of working in more “remotable” industries, like educational services and public administration. That trend, combined with having relatively low income levels, prices most black renters out of properties where they currently live, but high enough to potentially afford a home in a less-expensive metro.

“Teleworking has opened up more options for my family.  We’ve made a life here in Maryland, but with two small children being able to purchase a home back in Louisiana and be closer to my parents and our extended family is just what we need,” said Jonathon Holloway, a federal employee and Maryland renter who recently made an offer on a home in Louisiana.  “With everything that has happened this year, it makes you stop and realize what is really important. And for us, that’s family. Without the ability to telework, we might not have been able to make this transition.”

That opportunity is highly dependent on each specific market. In Baltimore, for example, it is more likely for Black households making $30,000 to $40,000 to have primary earners in health care administration and office work, which is highly “remotable”, while in Phoenix it is more common that someone in this bracket would be in travel, hospitality and accommodation, or food service, which is not.

Still, Zillow’s report notes that the black and white homeownership gap remains as wide today as it was at the dawn of the 20th century. Nearly 75% of white households own their homes, compared with just 44% of Black households. While remote work can open up opportunities to buy a home in more affordable locations, it doesn’t address the root of the various affordability issues for people of color. This means, for some people, achieving homeownership in this way will be a tradeoff against living some place they would prefer. For others, though, it could mean the sudden ability to move to an area they would have preferred in the first place. This analysis shows that Black renters are most likely to face this tradeoff decision.

“Although it’s well-known that the pandemic has been disproportionately harmful to Black communities, the rapid shift to remote work could make homeownership more broadly accessible,” said Manhertz. “It’s a rare opportunity for those in a position to take advantage of remote work. Unfortunately, this shift will not be a major factor in closing the homeownership gap nationally. The larger-scale solution must be to create options for affordable homeownership locally. Moving away may be a newer option for some, but it shouldn’t be the only option available to achieve homeownership.”

Although white and Asian renters are much more likely to work in more “remotable” industries, such as finance, insurance and tech, their incomes more often allow them to buy homes in their current metro areas.

At the national level, teleworking could open homeownership to 4.5% of all renter households, including  9% of Asian renters, 3.7% of Black renters, 5% of Latinx renters, and 4.1% of white renters. While the national numbers show the share of households with “remotable” work who could potentially afford a home in another metro area, they don’t paint the entire picture by considering how effects will impact each community differently based on variations in home prices, incomes, and industries geographically.

A starter home in the U.S. is around $132,000, which at recent low rates and a 20% down payment translates to estimated monthly payments of about $725, about 30% of income for a household earning $29,500 per year. Black and LatinX Americans are at the bottom of the ladder when it comes to wages, but for homeownership, the benefits of telework are larger at lower income levels. Job concentration has driven home values especially high in the largest metros and many households have been priced out. Telework has the potential to offer more flexibility and shift the affordability equation just enough for many households to get a foothold in homeownership.

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