Homeownership is becoming increasingly unaffordable for the average American, but new real estate analysis suggests that ethnic minority groups are hit hardest by housing unaffordability.
Home Ownership Blues
According to a new analysis from U.S. real estate brokerage Redfin, most potential homebuyers in the States feel like home ownership is now out of their reach. However, this same analysis suggests that certain groups will face more issues buying property than others.
Minorities Hit Hardest
Redfin data suggests that some racial minority households are less likely to be able to afford homeownership compared to U.S. buyers of European descent.
Small Percentage of Opportunity
Their analysis showed that the average Black household on a median income who used their services could only afford 7% of listings. The average Latino customer could afford just 10%.
Better Prospects for White Buyers
This was compared to white buyers, who, on average, could afford around 22% of listings.
Not True for All
However, these statistics are not true for all racial minorities. Asian households looking to buy with Redfin on the median income were eligible to buy 27% of all listings.
Wage Gap Plays a Big Part
Redfin’s chief economist Daryl Fairweather has pointed out that the wage gap between different ethnic groups is the main driver for this data. “The wage gap is a big part of it,” he said.
House Prices Soar
“Home prices have become so expensive in a lot of metro areas,” he continued. “It makes it really hard for Black and Latino households to be able to afford a home compared to their white counterparts.”
The Higher the Rate, the Higher the Payment
He also pointed out that mortgage rates and payments made it more difficult for low and median-income earners. “The higher the mortgage rate, the higher a mortgage payment will be. It creates another barrier for people with less income to put towards a down payment.”
Metropolitan Areas Becoming Unaffordable
Over the last few years, even the most affordable major metropolitan areas (which often have higher Black and Latino populations) are becoming more unaffordable for residents.
Even Detroit Is Affected
In Detroit, which still maintains some of the lowest rent payments on average, housing prices jumped by 21.4% between 2022 and the end of 2023.
City Statistics
Here, the average black household on a median income could afford 31.8% of 2023 listings, compared to 50% for Latinos and 66% of white households.
Racial Housing Affordability Gap
The Redfin report did not mince words when it released its analysis on the subject, writing, “The racial housing affordability gap exists nationwide, from the least affordable metros to the most affordable metros.”
Everyone Has Been Affected
In general, the housing market has become increasingly inaccessible to many Americans. Redfin classifies housing as affordable if median-income buyers only need to spend 30% of their income on mortgage payments annually.
No Longer Practical for Many
But unfortunately, the gap between income and house prices has widened considerably in recent years. In 2023 the average homebuyer would have to earn $109,868 annually in order for the average mortgage payment to only cost 30% of their income.
Increasingly Out of Reach
This is out of reach for most average Americans, considering that the average Black household has a median income of $52,860, the average Latino household sits at $62,800, and the average white household at $81,060.
Not All Doom and Gloom
While things may look bleak, it’s not all doom and gloom, according to Redfin, who pointed out that minority groups saw a jump in wages in 2023, which could contribute to ending the racial difference in housing affordability.
Another Redfin Report
Elijah de la Campa, a senior economist at Redfin, released another report indicating that things could be looking up for all buyers in 2024.
The Perfect Storm
“A perfect storm of inflation, high prices, soaring mortgage rates, and low housing supply caused 2023 to go down as the least affordable year for housing in recent history,” he wrote. “The good news is that affordability is already improving heading into the new year.”
Price Drops Expected
Redfin expects average rent prices to drop in 2024, meaning that many renters will have more to put aside for potential down payments. They also expect a 1% drop in house prices by the end of 2024 due to an increase in construction and, therefore, housing supply. And that’s not all.
Affordability Should Improve
“The drop in mortgage rates we are forecasting should improve affordability,” Fairweather added. “And since asking rents have been declining for three months in a row, that will put downward price pressure on more affordable, smaller homes. This should improve affordability for first-time home buyers seeking starter homes.”
Biden’s New 401(k) Rule: Employers Frustrated as Retirement Planning Responsibilities Shift
The latest Biden administration rule on 401(k) plans is reshaping how employers manage retirement plans. It’s a complex scenario requiring a fresh understanding of fiduciary duties and provider relationships. This rule aims to protect employees but also imposes new responsibilities on employers. Biden’s New 401(k) Rule: Employers Frustrated as Retirement Planning Responsibilities Shift
Elon Musk: New Immigration Bill ‘Enables Illegals to Vote’
Elon Musk is calling for prosecutions after the text for a new senate bill on immigration was released. Musk accused the new bill of “enabling illegals to vote.” Elon Musk: New Immigration Bill ‘Enables Illegals to Vote’
Colorado Officials Reject Sanctuary City Status, Warn Against ‘Dangerous Game’
With increasing numbers of migrants arriving in Colorado, public officials have rejected any notion of the state becoming a sanctuary for migrants and asylum seekers. Colorado Officials Reject Sanctuary City Status, Warn Against ‘Dangerous Game’
Disney Challenges DeSantis’ “Don’t Say Gay” Rule With a Hefty Lawsuit
Disney is set to appeal its refusal for a lawsuit against Ron DeSantis, who stripped the company of its rights for disagreeing with the Governor’s views on the teaching of sexual orientation in classrooms. Disney Challenges DeSantis’ “Don’t Say Gay” Rule With a Hefty Lawsuit
Trump on the Attack as 21 Million Americans Flock to Obamacare, Biden Pushes Forward
An unprecedented surge in health plan enrollments has reignited former President Donald Trump’s commitment to dismantling the program should he secure the GOP nomination once again. Trump on the Attack as 21 Million Americans Flock to Obamacare, Biden Pushes Forward
The post Detroit Joins Housing Affordability Crisis first appeared on From Frugal to Free.
Featured Image Credit: Shutterstock / Wandering views.
The content of this article is for informational purposes only and does not constitute or replace professional financial advice.
