Minority homeownership jumped last year, but challenges lie ahead

Minority homeownership rates jumped sharply last year as low interest rates combined with stimulus payments and high rental costs spurred a pandemic push among many consumers to buy a home. 

Asian, Black and Hispanic homeownership rates all jumped last year, and by more than 2 percentage points, according to quarterly Census Bureau data analyzed by The Washington Post.  

Homeownership rates were already going up sharply before the pandemic due to low interest rates, though home prices also have been rising dramatically, making affordability a challenge for low-and-moderate income borrowers. Some experts noted that there were pandemic challenges in collecting data and many are waiting for annual data to better understand the trends going forward. 

“The jump is incredible in the sense of being, ‘Wow, that’s big,’ but incredible also in the sense of, ‘Could it really be that big?’ ” said Chris Herbert, managing director at Harvard University’s Joint Center for Housing Studies, who spoke last week at an affordable housing conference. 

Because homeownership rates jumped across the board for borrowers of all races, many experts cautioned that the increase in homeownership did not affect the homeownership gap between white and Black Americans, which is larger now than it was in 1968 when Congress passed the Fair Housing Act to end discrimination.

“There clearly seem to have been gains but the gains have also been among whites, so the [homeownership] gaps really haven’t closed,” Herbert said.

In 2021, 75% of whites owned a home, compared with 68% of Asians, 54% of Hispanics and 46% of Blacks, The Washington Post reported citing quarterly census data. However, those findings do not match annual data reported by other housing groups. For example, the National Association of Realtors reported that in 2020 homeownership rates were 72.1% among whites, 61.7% among Asians, 51.1% among Hispanics and 43.4% among Blacks. 

Housing experts are still struggling to understand what factors went into the large increases in minority homeownership in 2021.

“A lot of people jumped into the homebuying market who we didn’t expect to,” said Dr. Jessica Lautz, vice president of demographics and behavioral insights at the National Association of Realtors. “The jump in first-time homebuyers to the highest share ever recorded really speaks to how the increase in rents are impacting potential first-time buyers.”

Down payment assistance programs also may have played a role, but there is no national data on their use. 

Many think low interest rates were largely responsible for the increase, by helping middle-class borrowers with higher incomes take the plunge to purchase a home. First-time homebuyers generally have been constrained due to the difficulty of competing with all-cash buyers and big jumps in home prices over the past few years, which made owning a home unaffordable. 

“Black households had been delaying homeownership for such a long time because they were going through a recovery period after the financial crisis,” said Jung Hyun Choi, a researcher at the Urban Institute who has posted research on the data. “We do think it’s very likely that higher-income groups probably were able to seize this opportunity because the credit box tightened during the pandemic.”

In addition, experts cite the Coronavirus Aid, Relief and Economic Security Act passed by Congress in 2020 that allowed homeowners affected by the pandemic to defer mortgage payments on federally backed loans if they experienced financial hardship. The U.S Treasury’s pandemic-era assistance giving direct deposit payments of roughly $654 billion helped many renters save up for a down payment as well, some experts said. 

“There were a lot of unique policy efforts during the pandemic to address the challenges, including a foreclosure moratorium, forbearance and funding for housing counselors that were key programs that helped Black and Latino households,” said Amalie Zinn, an Urban Institute research assistant. 

Last year also marked the first time that three Black women were in critical positions of power to promote minority homeownership as never before. The three women — Department of Housing and Urban Development Secretary Marcia Fudge, Federal Housing Finance Agency Director Sandra Thompson and Wells Fargo’s former head of home lending Kristy Fercho, who was just promoted to become the bank’s top diversity officer and served as 2022 chair of the Mortgage Bankers Association — spearheaded campaigns to improve housing affordability. 

Moreover, the industry is coming around to demographic shifts that indicate 70% of net new households over the next decade will be headed by minorities.

Digging deeper into the data, Choi and Zinn at the Urban Institute found other interesting clues, notably that some rural states with very small Black or Hispanic populations had the biggest increases in minority homeownership rates last year. Montana, Vermont, and Wyoming, for example, saw big increases in Black homeownership, while Connecticut saw a big increase in Latino homeownership rates from 2019 to 2021. 

Vanessa Perry, a professor of marketing, strategic management and public policy at George Washington University’s School of Business, said low interest rates were the most obvious explanation. 

“The Urban Institute analysis showed that Black and Hispanic homeownership went up in most states, which means it was a really widespread increase, although the increases are in areas where there’s very small Black and Hispanic populations.”

Perry and others are cautioning that the gains in homeownership rates could be erased because of the many challenges ahead. Mortgage rates have doubled, making homeownership less affordable compared with a year ago. Inventory is constrained so home prices have not fallen dramatically.

“This is a blip at best, because we know what’s happening with house prices, interest rates and inflation, so people are earning less, interest rates have more than doubled and house prices have not fallen,” Perry said. “Interest rates were really, really low and a lot of Hispanic and Black borrowers benefited from that and from strong employment.”