Sunday, July 28, 2019

Housing: Part 356 - Black Homeownership

Here is a new Bloomberg article on black homeownership.  The title is:
"Black Homeownership Falls to Record Low as Affordability Worsens"

The headline, and the article, are wrong.  Affordability isn't bad and that isn't why black homeownership is falling.

Here is a graph in the article, which also has an incorrect headline.  It says, "Over 25 years, the gap between blacks and whites has widened."  What the graph really shows is that from 25 years ago to 15 years ago the gap was narrowing, and then for the past 15 years it has been widening.

Here is a graph that combines old decennial Census data with the more recent quarterly data to provide a little more historical comparison.

From the Great Depression to the late 1960s, white homeownership rose as a result of Federal programs that explicitly excluded black families.  Then homeownership for black families increased, but then fell back again in the 1980s, for reasons I am not familiar with.  Then, in the late 1990s, it recovered back to the levels of the late 1970s, relative to aggregate US homeownership rates.

Then, homeownership peaked in 2004 for black families as well as for the US in general.  And the drop in ownership since then has been stronger among black families than among others.

To describe these trends with "Over 25 years, the gap between blacks and whites has widened." obscures what is important.  Black homeownership was recovering and expanding when mortgages were more available.  Note, however, that the recovery in ownership peaked near the beginning of the private securitization boom that lasted from roughly 2004 to 2007.  Since then the relative homeownership rate collapsed.

The disparate impact of the recession, the crisis, and the subsequent sharp tightening of lending standards on black households has been strong.  But, who would dare to claim that the pre-crisis housing market was good and that post-crisis lending market has been detrimental?

Here are the Zillow measure of mortgage and rent affordability - the portion of the median household's income required to pay the rent or the mortgage on the median housing unit.  It would be more accurate to say that it has been especially unaffordable not to be a homeowner in recent years.


  1. It's complicated.

  2. From the Great Depression to the late 1960s, white homeownership rose as a result of Federal programs that explicitly excluded black families.
    Q1: How exactly does home ownership rise as a result of federal programs? 20 years ago, you could make that statement, but I think now, one would need to show statistics of some sort. Didn't all advanced western countries show a gain in home ownership rates during that same time period? Should the large growth in American GDP be more or less a factor than federal home programs?

    Then homeownership for black families increased, but then fell back again in the 1980s, for reasons I am not familiar with.
    Q2: No one has any opinions? No competing explanations? I believe they enacted the CRA act in 1977, so that law should have encouraged more home ownership since it was done to EXPLICITLY counteract redlining... unless they had the opposite effect and made things worse.

    As for the mortgage affordability, maybe more and more people are interested in maximizing their disposable income (YOLO) and aren't really interested in anything more than 12 months into the future.

    1. You're correct that rising incomes probably are responsible for much of the rise in homeownership after WW II and it was an oversimplification for me to attribute it to federal programs.

      On the fall during the 1980s, I am sure there are explanations, but I just am not familiar with all of them, and I decided to cut my time investment off there, as it is tertiary to the rest of the post.

      I'm not sure how to interpret your mortgage affordability comment. In monthly cash flow terms, many low tier properties would require much lower mortgage payments than rent payments. Short-sighted people would buy a home and defer maintenance on the property if that was the driving factor.

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