Opinion: Home prices could rise another 20% this year, but black families are struggling to take advantage

By January of this year, the typical American home had made over $50,000 in assess from a year earlier – a jump of almost 20% – as millions of buyers bid against each other in a market defined by historically low inventory. The Sun Belt, which has been a relatively affordable alternative to ultra-expensive coastal markets, was particularly hot, with house values in major markets earning up to 45%.
It looks more and more like this year will be more of the same. Home value growth has already accelerated well ahead of the typical spring buying season, and we’ve just seen the biggest drop in inventory in at least three years. Zillow’s economic research team predicts house values will gain another nearly 20% by the end of the year.
While this is good news for homeowners seeing their equity grow, millions of Americans trying to buy a home for the first time are seeing that dream slip away. This is especially true for black Americans, who have been hit hard by the pandemic. job losses. Black homeownership is lower today than it was a decade ago. A big part of the problem is that black Americans generally have lower incomes and less wealth, which makes it harder to save for a down payment. And they are more likely to have no credit history and be denied a mortgage.
The typical black household owns less than a quarter of the wealth of a typical white household – $3 trillion difference which has expanded over the past decade. Housing disparities—caused by generations of systemic inequalities, such as redlining and disparate access to credit—account for nearly 40% of this gap. Black owned houses are worth about 18% less than white-owned homes.

Combined, all of these factors mean that black families are at risk of falling further behind despite unprecedented growth in the housing market. And because home ownership is a major driver of generational wealth in America, their children and grandchildren are also likely to fall further behind.

But there are steps we can take to prevent the wealth gap from widening even further:

Build, build, build

Adding stocks of all types will be needed to significantly slow price growth and unlock home ownership for more Americans.

More than 60% of homes in the United States are single family homes, with many of these neighborhoods created and maintained that way largely through decades-old zoning restrictions. They also skew more white and tend to be more Dear than the larger metropolitan area in which they are located.
Easing zoning rules allowing modest intensification in single-family neighborhoods would add millions of homes to our stifled housing supply. And that’s something that a majority of the owners — and two-thirds of black owners — agree it should be allowed. Zillow research has shown that allowing an extra unit on just 10% of single-family lots can bring in over $3 million new houses in only 17 metropolitan areas. It is particularly important for households of colorwho are more likely to live in higher density housing, including condos and townhouses.

Reform the credit system

People with structural access to credit and a strong credit history are more likely to own a home.

Black Americans are more likely than whites to have no credit history, and those with marginal, low or no credit will find it difficult to get a loan and will pay more for it. Majority Black, Indigenous and of Color (BIPOC) communities also have less access to financial services and are closer to predatory services, such as payday lenders and pawnbrokers.
We need to create a credit reporting system that regularly takes into account things like rental history and utility bill payments (and that doesn’t weigh so heavily on credit cards, car loans and mortgages), and work to provide equitable financial services to underserved communities. Fannie Mae recently began allowing rental payment history to be taken into account to give certain buyers a better chance of qualifying.

Down payment assistance

A down payment is an increasingly difficult barrier to home ownership. First-time home buyers should expect to spend another year saving for deposit than it would have needed just five years ago. There’s help – in fact, over 2,000 counties have 10 or more programs available that offer grants or loans to help with down payments and closing costs. But buyers are generally unaware of the help available, and more is needed.

Plus, first-time buyer savings accounts offer people a tax-free way to save for a down payment and closing costs, similar to tax-free college savings programs. Such accounts are now available in some states, but the federal government should take the lead in providing them everywhere.

Bias training and protective measures

Everyone should be able to buy and find housing free from prejudice, discrimination and racism. Anyone responsible for real estate license renewal requirements should mandate implicit bias training. This way, industry professionals have the tools they need to ensure that they are not creating barriers preventing people from accessing certain communities or opportunities. Likewise, more states should require fair lending training that addresses the effect of bias, and lenders should review and update their training to ensure it is addressed. The industry should also embrace remote office appraisals, which rely on visual technology, such as 3D tours and digital floor plans, rather than an in-person tour of the property. This can reduce bias in the valuation process so that existing BIPOC owners can tap into their equity more fairly and be protected from discriminatory practices.
No one alive today will see America reach racial equality in housing. We will need renewed investment in these and other solutions to prevent the gap from widening during this overheated market and put us on track to ensure housing market growth is fair, just and beneficial. .

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