The pandemic housing boom marked a new — though possibly short-lived — entrée into homeownership for Black, Asian and Latino families, many of whom had for years been sidelined into the much costlier rental market.Get the full experience.Choose your plan ArrowRight
Helped by pandemic-era stimulus programs, Black, Latino and Asian households saw the sharpest increase in homeownership in 2021 since the Great Recession, when all their levels of owning had fallen, according to an analysis of new federal data by The Washington Post.The growth for minority households was more pronounced than for White households.The recent housing surge also led to seismic changes in the rental market in 2021, as fewer Americans of every race and age rented for the first time since the Great Recession.For African Americans, 2021 marked the first time their share of the rental market dipped since 2000.
While these trends have likely stalled in the more recent housing cool down, they offer a glimmer of hope in narrowing the vast and historically-rooted racial gap in homeownership, which tends to be more affordable than renting over time.Housing experts say 2021 will go down as a significant year for access to homeownership, reversing trends that largely bypassed people of color from the benefits of homeownership in the years following the 2007-2008 housing crisis.
“We’re seeing a real spark in Black and Latino homeownership because people — in large part, millennials — were able to save during the pandemic,” said Andre Perry, a senior fellow at the Brookings Institution.“Now whether it’s sustained, that’s a different story.
But what you saw in 2021 is a good thing because homeownership creates wealth and other opportunities that benefit entire communities.” Rents are up more than 30 percent in some cities, forcing millions to find another place to live During the pandemic, Black and Hispanic Americans, in particular, were disproportionately hit by layoffs and were at higher risk of covid-related complications early in the pandemic.But federal stimulus checks, combined with rental assistance and student loan freezes meant that many families were able to save at record rates beginning in 2020.Rock-bottom interest rates made it cheaper to borrow for a house.For a subset of renters with steady jobs and enough savings to fashion a down payment, that boost was enough to nudge them into homeownership earlier than they’d anticipated.
“Was I planning to buy? Not at all,” said Taria Faison, 45, a Baltimore podcaster who closed on a townhouse in fall 2021.“But rent kept going up and the cracks in our walls kept getting bigger.And finally we just said, ‘something has to change.’ Faison and her husband, Cory, a fire alarm technician, dipped into his 401(k) to cover the down payment on their $333,000 home.Their mortgage payments of $2,000 a month are a bit more than their rent, but Faison said she finds comfort in knowing that she’s building equity.“It’s what I want to be able to do for my children,” she said.“This is how generational wealth starts.” Home values soared during the pandemic, except for these Black families The recently released data from the Census Bureau captures a narrow window in 2021, before interest rates skyrocketed and the housing market reached this year’s fevered heights.A smaller proportion of Americans rented in 2021 than at any point since the Great Recession.
The shift in homeownership marks a reversal from more than a decade of increased rentership among Americans across demographics.More Americans had been renting more, even at older ages.And these renters have been spending more of their income on housing than homeowners.
The trend of costlier rent began after the Great Recession and has continued through the pandemic.Today’s renters are about twice as likely to be burdened by housing costs — spending 30 percent or more of their income on housing — as homeowners are.The difference in housing costs for homeowners and renters has widened to a 40-year high, a Post analysis found.Renters more likely than owners to be burdened by housing costs Percent of people in households that spend at least 30 percent of income on housing 50% burdened by housing costs 45% Renters were twice as likely to be burdened as owners in 2021 23 ppt 25 Great Recession 20% Lower interest rates in the 1980s reduced costs for many homeowners 0 1980 1990 2000 2010 2020 Renters far more likely than homeowners to be burdened by housing costs Percent of people in households that spend at least 30 percent of income on housing 50% burdened by housing costs 45% Renters were more than twice as likely to be burdened as owners in 2021 23 ppt 25 Great Recession 20% Lower interest rates in the 1980s reduced costs for many homeowners 0 1980 1990 2000 2010 2020 Renters are now far more likely to be burdened by housing costs than homeowners Percent of people in households that spend at least 30 percent of income on housing 50% burdened by housing costs Renters 45% In 1980, slightly more owners than renters were burdened by housing costs Renters were more than twice as likely to be burdened as owners in 2021 23 ppt 25 ppt 30 Great Recession 20 Homeowners 20% Interest rate drops in the 1980s lowered housing costs for many owners 10 0 1980 1990 2000 2010 2020 Tiffany Harding, a government contractor who bought a $275,000 condominium in Upper Marlboro, Md., last year, lived with her parents for a year to save for a down payment.
Even so, she says there’s no way she could afford the same home now.Borrowing costs have more than doubled from the 3 percent interest rate she secured last October, which would add about $600 to her monthly payments and make them unaffordable.“I’m a Black single woman with a steady career and good credit, but even then I always thought buying was out of my reach,” said Harding, 42.“I found a window where I could make it work.” Four reasons your rent is going up But the recent homeownership gains for people of color obfuscate long term and systemic hurdles that have yet to be addressed.
Minority groups have long been shut out of homeownership because of widespread discrimination and structural racism, including in the banking system, which often steered Black and Hispanic buyers into loans with higher interest rates and shoddier terms.Overall, homeownership rates for minority groups still lag far behind those for White families: 46% of Black Americans lived in homes they own in 2021, compared to 75% of White Americans.That gap is wider than it was in 1960.“There are some promising developments, but it isn’t enough to make up for the fact that Black and Latino families have historically been deprived of access to homeownership,” said Vanessa Perry, a public policy professor at George Washington University.“They have not had the opportunity to build equity and use that equity to fund things like college education and retirements.As a result, every consecutive generation of renters misses out on major opportunities that are hard to match with any other route to wealth building.” In interviews, minority first-time home buyers who bought during the pandemic said a combination of extra savings, low interest rates and rapidly-rising rents prompted them to purchase property.Many were paying about the same for housing as they had while renting.Almost all said they ended up buying sooner than they’d planned to, because they were quickly being priced out of rental homes and apartments.
Experts say homeownership is just one part of the equation in leveling racial inequality.Not only is it more difficult and costly for minority families to buy homes — mortgage rates for Black homeowners are, on average, 0.3 percentage points higher than for White homeowners, according to the Urban Institute — their homes appreciate at a lower rate, too.
A Black-owned house in predominantly-Black neighborhood is valued significantly less than if it were owned by a White family in a predominantly-White neighborhood, according to William Darity, an economics and African American Studies professor at Duke University.“Even if we were closing the home-ownership gap — which we’re not — there’s still a large equity gap between Black- and White-owned homes,” he said.“We’re talking a big difference: $150,000 or $200,000, and that’s been true for half a century.” Some of the country’s largest banks — which for years have been accused of racial profiling and discrimination — say they’re taking steps to help minorities buy homes for the first time.
JPMorgan Chase, for example, said it would underwrite $8 billion in mortgages to help 40,000 for Black and Hispanic borrowers in 2020.Bank of America, which is committing $15 billion to help low- and middle-income families buy their first homes, recently announced a no-down payment homeownership program for first-time buyers in predominantly-Black and -Hispanic neighborhoods in cities like Dallas and Charlotte.Big business pledged nearly $50 billion for racial justice after George Floyd’s death.
Where did the money go? But economists say there is also a more fundamental hurdle to homeownership: A dwindling supply of available homes, especially for first-time buyers.
The financial crisis gutted the construction industry, leaving it with fewer workers and less financing.New home construction fell nearly 80 percent between 2006 and 2009 and has struggled to recover , exacerbating a shortage of as many as 5 million single-family homes.That mismatch between supply and demand has led to large spikes in both home prices and rents.
Rents have risen more than 20 percent in two years, according to Redfin, with the average U.S.listing now exceeding $2,000 a month.Home prices, meanwhile, are about 35 percent higher than they were in late 2020.Rents are rising everywhere.
See how much prices are up in your area.Daniela Capistrano, a small-business owner in the New Orleans area, bought their first home in May.Capistrano and their partner weren’t planning to buy just yet.But rapidly rising rents had them feeling desperate, so they quickly snapped up a $360,000 starter home for themselves, their toddler, cat and dog.
Growing up in California, their parents always rented and Capistrano had been saving up for a down payment since they were 19.After moving 10 times in the last 10 years, Capistrano said it finally feels like they have a place to live for the long haul.Home-buying was as much about “escaping the horrors of renting” as it was about owning a house, said the 40-year-old who identifies as Latinx.“Ideally we’d have had more time to shop around, to get better loan terms, but we had to make a hard and fast decision in this bonkers housing market,” Capistrano said.
“Rents were doubling and tripling.We kind of felt like: If we’re already paying mortgage-level rents, why not get a mortgage?” Those calculations — monthly rent versus mortgage payments — are quickly becoming even more fraught as mortgage rates climb to 20-year highs.
The surge in both home prices and interest rates has made it particularly harder for Black renters to break into the housing market, according to an August report from the Harvard Joint Center, which found that less than half of Black renters who could afford a median-priced home a year ago can still do so.That’s compared to a 44 percent drop among renters of all races.Mortgage rates rise above 7 percent as Fed scrambles to slow economy With their $1,500 monthly rent set to rise by $500, Fernando Soto Gaulden and his husband panicked — and bought a house.It happened faster than the couple had hoped to move, scooping up a 3-bedroom new build in Charleston, S.C., this August.But they were quickly getting priced out of nearby rentals and worried that their apartment would soon become unaffordable.Gaulden, a Mexican immigrant, is the first to own a home in his family.
He and his husband now pay about $1,700 a month on their mortgage — less than they would have on rent.“House prices were soaring so much that we really started to feel desperate, like there was no way to we could afford to keep renting,” said Gaulden, 27, who works for a Spanish news website.“It became really important to lock in how much we were paying for housing as quickly as we could.We had to make a lot of quick decisions on needs versus wants.” This story uses microdata from the decennial census and the American Community Survey (ACS).
Census and ACS data were accessed via IPUMS for the years 1980-2020 and via tidycensus for 2021.The 2007 and 2010 data points each include three years of data, while the 2015 and 2020 data points each use five years of data and 2021 uses a one-year sample..
