Real Estate Racism: Why It’s Still Hard For Hispanics & Blacks To Become Homeowners

January 23, 2014  |  

The odds are still stacked against black and Hispanic home buyers. Although they are not as likely as whites and Asians to apply for a mortgage, when they do, chances are they won’t be approved, found a joint report by Zillow and the National Urban League.

The conclusions in “A House Divided: How Race Colors the Path to Homeownership” were based on Home Mortgage Disclosure Act data, the Zillow Home Value Index and a survey conducted by Ipsos. What the report revealed is that minorities — especially blacks and Hispanics — had more obstacles to homeownership in comparison to white property buyers, reports The Pittsburgh Post Gazette.

“The American dream of homeownership is not equally shared by all, even today. Our research shows that minority homebuyers are encountering difficulties that often aren’t shared by white homebuyers,” said Stan Humphries, chief economist for online real estate database Zillow.

“Even after they achieve the dream, they are less likely to see a similar return on their investment.”

Even though blacks comprise 12.1 percent of the U.S. population, they made up just 6 percent of all mortgage applications in 2012, says the report. Hispanics, who are 17.3 percent of the population, put in only 9.4 percent of the applications.  And whites, at 63 percent of the U.S. population, filed the majority of mortgage applications–64.8 percent– in 2012.

Blacks and Hispanics generally start off at a disadvantage in the home buying process. They tend to have lower incomes, resulting in lower down payments. According to the report, blacks tend to put down 5 percent or less; most  Hispanics made down payments of 6 percent or more.

In contrast, Asians usually made down payments of 20 percent or more (4.8 percent of the population); 33 percent of whites put down 20 percent or more.

While blacks and Hispanics are less likely to apply for bank home loan, they are much more apt to file for a Federal Housing Authority mortgage. This is because under FHA loans borrowers can purchase a home with as little as a 3.5 percent down. Conventional loans are usually around  20 percent down.

“More than half of black applicants (57.4 percent) and 60.3 percent of Hispanic mortgage loan applicants applied for an FHA loan. In contrast, less than one-third of white applicants (30.1 percent) applied for an FHA loan,” reports the newspaper.

The loan process for blacks and Hispanics tends to be longer — after which they are usually denied.  Blacks are denied 2.4 times more than whites and Hispanics, 1.98 times more.

Zillow also looked how different races experienced the housing boom and bust. In predominantly Hispanic neighborhoods home values dropped 46.2 percent. Black communities nationwide dropped 32.3 percent. By contrast, mainly white communities had their home values drop an average 23.6 percent.

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