TAMPA, Fla. (WFLA) — In the current housing market, owning a home is already difficult, especially for first-time homebuyers. Across the United States, minorities are approved for mortgages less often than their white neighbors, according to Zillow.
Zillow, a real estate company, studied mortgage denials across the country to see which demographics were denied mortgages more often. The company analyzed data from the Home Mortgage Disclosure Act during its research.
“The mortgage denial rate was 84% higher for Black applicants than white applicants in 2020 (the latest year for which data is available), according to HMDA, up from 74% in 2019. Nationwide, 19.8% of Black applicants were denied a mortgage in 2020, the highest among races and much higher than the 10.7% of white applicants who are denied,” according to data Zillow analyzed from the HMDA.
Unlike credit card payments, student loans, or other types of consumer debts, home equity turns from money-sink into a wealth asset over time for many Americans.
As property values rise and homeowners pay off their loans, i.e. mortgages, the market turns shelter into an investment. Rising home prices are now increasing equity amounts for homeowners more quickly, as the shortage of available housing inventory for buyers stays limited.
In Florida, the largest percentage of mortgage rejections in 2020 were among American Indian or Alaska Native homebuyers, with 22% of all applicants denied mortgages. According to the Zillow report, closely behind were Black homebuyers, with 21.8% of them seeing their mortgage applications denied. For Hispanic families trying to get a mortgage approved, 18.3% were rejected.
“Prior to the pandemic, Black homeownership had already hit a record low of 40.6% in the second quarter of 2019,” according to CNBC.
Data from the U.S. Census Bureau showed that pre-pandemic Black homeownership had fallen to 40.6% by the second quarter of the fiscal year. By 2020 Q2, the number of Black homeowners had risen to 47%, but fell again in 2021 Q2 when the percentage shrunk again to 44.6%. In 2019 Q2, at the same time, 57.7% of Asian, Native, Hawaiian and Pacific Islanders owned their homes. That number went up to 61.4% in 2020 Q2, but fell to 58.7% in 2021 Q2.
In the past five years, from 2017 to 2021, Black homeowners across the U.S. remained the demographic in the United States with the lowest percentage of homeowners among their population.
Hispanic families weren’t far behind, while non-Hispanic white families had the highest homeownership rates nationwide, at 71.8% or higher, quarter by quarter.
Echoing a higher likelihood of homeownership among white families and homebuyers, Zillow’s study of HMDA data showed that, compared to all minority demographics, whites had the lowest mortgage denial rate, at just 14.3% in Florida.
Zillow reported a similar gap trend in Tampa concerning the rent burdens families face. The study was published in October 2021, finding that Black and Latinx families spent a higher percentage of their monthly income on rent, meaning more households were rent-burdened compared to their white neighbors.
Mortgages have, historically, been cheaper options than renting while also providing financial equity to families.
The Zillow study showed that households of color “were more likely to report encountering housing and economic challenges due to the pandemic.” Black families were reportedly “more likely than white ones to report a job or income loss and difficulty keeping up with mortgage or rent payments,” adding to the issue of mortgage denial. Mortgage approval is also affected by income, after all, a mortgage is a loan, and the ability to pay off the loan has a significant effect on approval.
“Black home purchase applicants in 2020 had a median income of $67,000, compared to an overall median of $83,000 for all applicants,” Zillow reported. “This may help explain why Black mortgage applicants had smaller down payments in 2020 than applicants from other races.” Zillow also said the median property value of homes Black applicants were trying to purchase through a mortgage were typically lower than any other applicants’ property values, on average.
“Black applicants also typically applied to purchase less-expensive homes in 2020 than applicants from other races – a median property value of $225,000 for Black applicants, and $275,000 for all applicants,” Zillow reported. “The typical down payment from a Black applicant was $16,600 less than the overall median down payment in 2020.”
Affordable housing concerns are common across the U.S., as material shortages and limited housing markets push prices up for those trying to buy their first homes, or move somewhere new.