Redfin reports that nationwide, a Black family
earning the median U.S. income would spend more than 40% of their
income on monthly housing costs to afford the typical starter
home
(NASDAQ: RDFN) —The typical Black household can afford a starter
home in just 10 of the 50 most populous U.S. metros, according to a
new report from Redfin (redfin.com), the technology-powered real
estate brokerage. The typical white family can afford a starter
home in 32 of those metros, over three times more.
This is using the rule of thumb that a household should spend no
more than 30% of their income on monthly housing costs. Redfin uses
the words “household” and “family” interchangeably in this report.
“Starter homes” means homes estimated to be in the 5th to 35th
percentile of their respective metro area based on market
value.
Detroit is the most affordable major metro area for Black
families looking to buy a starter home. In Detroit, a family
earning the local median income for a Black household would spend
16% of their earnings to afford the median-priced starter home,
taking current mortgage rates into account.
Detroit is followed by St. Louis, where a family earning the
local median income for a Black household would spend 21% of their
earnings to afford the typical starter home. Next come Baltimore
(23%), Indianapolis (26%), Philadelphia (27%), Cleveland (27%),
Pittsburgh (29%), Warren, MI (30%), Columbus, OH (30%) and Kansas
City, MO (30%).
Starter homes are affordable to Black families in those metro
areas because they’re among the least expensive places in the
country to buy a home. In Detroit, for instance, the typical
starter home costs just $66,000 and comes with a median monthly
payment of $579.
The typical Black family is unable to afford the
median-priced starter home in the vast majority of major
metros
Starter homes are unaffordable to the typical Black household in
the 40 other U.S. metros included in this analysis.
In San Francisco, a Black family earning the local median income
would have to spend more money than they make (104% of their
earnings) on the typical starter home—the highest share in the
country. All five of the least affordable markets for starter homes
for Black families are in California; after San Francisco comes
neighboring San Jose, where the typical Black family would spend
89% of their income on a starter home. Rounding out the top five
are Los Angeles (81%), San Diego (78%) and Anaheim (71%).
It’s essentially impossible for typical Black families to afford
starter homes in much of California, even with healthy earnings,
because it’s home to such expensive housing markets. In San
Francisco, where the median household income for Black households
is $81,205, starter homes are unaffordable because the
median-priced starter home costs nearly $1 million and the monthly
payment is over $7,000.
Nationwide, the typical Black family would spend 41% of their
earnings on housing to afford a starter home
Zooming out to the nation as a whole, the median-priced starter
home is unaffordable to the typical Black American family. A
household earning the median U.S. income for Black families
($57,129) would spend 41% of their earnings to afford the typical
U.S. starter home, which costs $250,000 and comes with a monthly
payment of $1,960 at the current average mortgage rate.
For comparison, starter homes are affordable to the typical
white family nationwide. A household earning the median U.S. income
for white families ($90,995) would spend 26% of their earnings to
afford the typical starter home. The story is similar for Asian
Americans; a household earning the median U.S. income for Asian
households would spend 20% of their earnings to afford the typical
starter home. Starter homes are unaffordable for Hispanic families,
though the affordability gap is relatively small: Hispanic
households would spend 32% of their incomes on the median-priced
starter home.
“Starter homes have become increasingly difficult for everyone
to afford, with prices of the typical starter home up 8% in the
last year alone. That has pushed buyers who earn more money to buy
starter homes and pushed lower-income buyers out of the market
altogether–and many of those lower-income buyers are Black,” said
Redfin Senior Economist Elijah de la Campa. “The encouraging news
is that while there’s still a major homeownership gap between Black
and white families, there are signs more Black Americans could
start getting their foot in the door: The share of U.S. mortgages
taken out by Black homebuyers has ticked up recently, and the
racial wage gap is shrinking.”
Before the pandemic homebuying frenzy drove up housing costs,
median-earning Black families could afford the typical U.S. starter
home, though without much wiggle room. In 2019, Black families
would have spent about 28% of their income on a starter home. The
last time starter homes were affordable to a Black family earning
the median income was January 2022, just before mortgage rates
started increasing. White families could more comfortably afford
starter homes before the pandemic; they would have spent around 17%
of their income on one in 2019.
Racial wealth gap makes it harder for Black families to
afford starter homes
It’s considerably more difficult for the typical Black family
than the typical white family to afford starter homes because the
median income is lower for Black households. Additionally, Black
families have less generational wealth, stemming from the nation’s
history of systemic racism. The racial income gap is a big driver
of the racial housing affordability gap: The estimated median
income for Black households nationwide is $57,129; for white
families, it’s $90,995.
In addition to the income gap, there’s a major racial wealth
gap: The gap between Black and white families in liquid assets is
even bigger than the income gap. That’s partly due to decades of
redlining, racist housing covenants and other discriminatory
policies. Black homebuyers also face other barriers to buying real
estate; for instance, they’re more likely to have their mortgage
applications rejected. Less than half (45.9%) of Black Americans
own their homes, compared with 73.8% of white Americans. That means
Black households are much more likely to be renters, and the
increasing cost of starter homes also pushes prices of rentals up
because of increased demand.
That leaves Black families who rent with higher rental payments
and less opportunity to save for a down payment than before the
pandemic housing boom drove up prices. It leaves Black families who
are buying a home with lower down payments and bigger monthly
mortgage payments.
To view the full report, including a chart, methodology and more
metro-level data, please visit:
https://www.redfin.com/news/starter-homes-unaffordable-black-households/
About Redfin
Redfin (www.redfin.com) is a technology-powered real estate
company. We help people find a place to live with brokerage,
rentals, lending, title insurance, and renovations services. We run
the country's #1 real estate brokerage site. Our customers can save
thousands in fees while working with a top agent. Our home-buying
customers see homes first with on-demand tours, and our lending and
title services help them close quickly. Customers selling a home
can have our renovations crew fix it up to sell for top dollar. Our
rentals business empowers millions nationwide to find apartments
and houses for rent. Since launching in 2006, we've saved customers
more than $1.6 billion in commissions. We serve more than 100
markets across the U.S. and Canada and employ over 4,000
people.
Redfin’s subsidiaries and affiliated brands include: Bay Equity
Home Loans®, Rent.™, Apartment Guide®, Title Forward® and
WalkScore®.
For more information or to contact a local Redfin real estate
agent, visit www.redfin.com. To learn about housing market trends
and download data, visit the Redfin Data Center. To be added to
Redfin's press release distribution list, email press@redfin.com.
To view Redfin's press center, click here.
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version on businesswire.com: https://www.businesswire.com/news/home/20240627740171/en/
Contact Redfin Redfin Journalist Services: Isabelle Novak
press@redfin.com
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