RealEstateEconomyWatch.com

son2009.pdf

The make-up of American homeownership is becoming increasingly white as foreclosures turn the dream of owning a home into a nightmare for thousands of minority families, pushing the minority homeownership rate to its lowest level in decades.

According to a recent study by the Pew Hispanic Center, a project of the Pew Research Center, from 1995 through the middle of this decade, homeownership rates rose more rapidly among all minorities than among whites. But since the start of the housing bust in 2005, rates have fallen more steeply for two of the nation’s largest minority groups-blacks and native-born Latinos-than for the rest of the population. 

As of 2008, 74.9 percent of whites owned homes, compared with 59.1 percent of Asians, 48.9 percent of Hispanics and 47.5 percent of blacks. African American homeowners make up only 9 percent of the nation’s homeowners. Twenty-four percent of the nation’s homeowners are racial/ethnic minorities, with Hispanic homeowners accounting for 11 percent, and Asian/Pacific Islanders accounting for 4 percent.

Minorities were overexposed to subprime loans.  . One in 10 black homeowners is likely to face foreclosure proceedings, compared to only one in 25 whites. HUD estimates that the median share of high-cost loans issued between 2004 and 2006 in low-income minority census tracts was nearly one-half, while the median share in low-income white neighborhoods was one-third. In addition, the median foreclosure rate from January 2007 through June 2008 was 8.4 percent in low-income minority neighborhoods-significantly higher than the 6.3 percent in low-income white neighborhoods.

The shift in the leading cause of foreclosures from subprime loans to unemployment promises no relief to minorities struggling to stay in their homes.  They have higher unemployment rates than whites, as well as higher job losses during economic downturns. When the national unemployment rate peaked at 10.8 percent following the 1982 recession, joblessness among black workers was nearly twice as high at 20.9 percent. In April of this year, the unemployment rate was 15.0 percent for blacks and 11.3 percent for Hispanics, compared with 8.0 percent for whites.

African-Americans and Hispanics are at risk of losing their homes at two to three times the rate of whites.  In July, Neighborworks America, an organization that  national trainer of homeownership counseling, found that 21 percent of the at risk homeowners it was counseling were Hispanic homeowners, nearly twice their representation of total homeowners, and 28 percent were African-Americans, three times their representation among total homeowners.

Though many minorities are struggling to meet mortgage payments and minority ownership rates are declining, housing forecasters look to minorities to fuel a significant amount of the demand for homeownership when the current crisis ends and the recovery takes effect.

For immigrants, the housing crisis has brought more opportunity than despair. According to the Pew study, immigrant householders are less likely than native-born householders to be homeowners (52.9 percent versus 70.0 percent in 2008) but their losses in recent years have been smaller than those of the native born. Many self-finance their purchases or borrow money from relatives or ethnic financing arrangements.

The State of the Nation’s Housing 2009 by the Joint Center for Housing Studies at Harvard sees the decline in minority homeownership to be only temporary, ending with the stabilizing of the housing markets.  The aging of the large and ethnically diverse echo-boom generation will increase the minority share of households. In fact, even under the low immigration assumptions, minorities will fuel 73 percent of household growth in 2010-20, with Hispanics leading the way at 36 percent. As a result, the minority share of households is projected to increase from 29 percent in 2005 to 35 percent in 2020. Unlike white household growth, which will occur primarily among single-person households, minorities will add to households across the full spectrum of family types.

Whether homeownership will lose its luster for minorities, so many of whom are struggling with default and foreclosure, will be a critical factor in the make-up of the post-recovery market.