Anti-Black racism in the housing market is hurting homeowners across the US.
Real estate company Clever collected data on home values across the US, looking at patterns across predominantly Black and white neighborhoods. The data shows that homes in majority Black neighborhoods are being massively undervalued, which has ripple effects across the larger US economy.
Clever’s data shows that, with each 1% increase in the proportion of Black residents in a zip code, home values decrease by approximately $2,581.
The racial wealth gap in America is huge — and is apparent in all sorts of financial data, from income to net worth to home equity. The study, conducted using data from Realtor.com and Zillow.com along with 2019 Census Bureau data, showed a massive disparity between the ability of Black and white Americans to buy homes, and see the values of their homes increase.
Despite anti-discrimination laws for housing and mortgages, Black Americans are still having a harder time getting mortgages than white Americans. Facing a lower average family net worth — a figure that’s scrutinized during the mortgage approval process — it can be harder for some Black Americans to get approved.
Black Americans also tend to pay more for their mortgages than white Americans. A 2015 study by the Journal of Real Estate Finance and Economics found that Black borrowers paid 0.29% more on a mortgage than a similar white family. Black women are typically charged 0.57% more than white women for a mortgage.
When Black Americans sell a home, those homes are often under-valued. Clever’s data found that the average home in predominantly Black metro areas has an average listing price of $167,508, while the typical home in a white neighborhood has an average listing price of $335,000. Price per square foot also reflects this disparity — Black neighborhoods see a median price per square foot of $115, while homes in white neighborhoods have a median of $193.
Closing the racial wealth gap would be benefit everyone in the US. Indeed, over the past 20 years, the racial wealth gap has cost the US $16 trillion.
Home equity plays a large role in every family’s wealth. Clever’s data points out that every 10% increase in home equity and wealth in housing creates $147 billion in spending — and that’s no small amount as the country recovers from one of the worst economic disasters in years caused by the coronavirus pandemic.
Many Americans derive a large portion of their net worth from their home — on average, home equity is 28.9% of a family’s net worth, according to Census Bureau data. The affordability and value issues that perpetuate the racial homeownership gap also play a big part in the racial wealth gap.
Closing that gap could help benefit the country, and the housing market, as a whole.