Zillow: Minorities Encounter More Struggles In Homeownership

Blacks and Hispanics have a much different experience when it comes to homeownership and seeking a mortgage compared to whites, according to a research report by Zillow and the National Urban League.

‘Our research shows that minority home buyers are encountering difficulties that often aren't shared by white home buyers, and that even after they achieve the dream, they are less likely to see a similar return on their investment," comments Stan Humphries, chief economist for Zillow.

According to the report, blacks and Hispanics are less likely to apply for a mortgage. While blacks make up 12.1% of the U.S. population, they filed 6% of all mortgage purchase applications in 2012. Hispanics make up 17.3% of the population but filed 9.4% of applications.

In contrast, whites make up 63% of the U.S. population and filed 64.8% of purchase applications.

Zillow reports that blacks and Hispanics are much more likely to apply for a Federal Housing Administration (FHA) mortgage for a home purchase than a conventional loan. More than half of black applicants (57.4%) – and 60.3% of Hispanic applicants – applied for an FHA loan.

By comparison, less than one-third (30.1%) of white applicants applied for an FHA loan.

The report also says that blacks and Hispanics are much more likely than whites to have their mortgage applications denied. When applying for a conventional loan, black applicants are 2.4 times – and Hispanic applicants are 1.98 times – more likely than white applicants to be denied.

Zillow believes that much of that difference is attributable to the different resources and qualifications of minority versus white applicants, but its research was not able to examine the extent to which discrimination was at play in lending decisions.

After homeownership is achieved, neighborhoods with high minority populations have faced more overall depreciation since home values peaked. Since peak, home values fell 28.3% in neighborhoods with a high black population, and 29.7% in neighborhoods with a high Hispanic population.

By contrast, home values in neighborhoods with high white populations fell 15.8% and in neighborhoods with high Asian populations fell 3.1%.

Zillow also reports the differences from the effects of the housing boom and bust. Hispanic communities were the most affected: Home values dropped 46.2% from the height of the bubble to the bottom.

For comparison, black communities saw a 32.3% drop over the same period. For whites and Asians, values dropped 23.6% and 19.9%, respectively.

However, Zillow notes that for Hispanics, there is a "silver lining," as there has been a relatively fast recovery – a 25.3% increase from the bottom over the past two years. The company forecasts that in terms of home value growth, Hispanic communities will fare the best over the next year.

Marc H. Morial, president and CEO of the National Urban League, concludes there is "hard work that remains to ensure that all Americans achieve the dream of homeownership and begin to build real and lasting wealth."

To view Zillow and the National Urban League's entire report, "A House Divided – How Race Colors the Path to Homeownership," click here.


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