Black homeownership rates similar to before 1968 Fair Housing Act

An article about homeownership among black millennials includes this statistic:

Homeownership levels for blacks reached 42.7% in the third quarter of 2019 (compared with 64.8% for the overall population), a near-record low that has virtually erased all of the gains made since the passage of the Fair Housing ACt in 1968, landmark legislation outlawing housing discrimination, census data show.

“African Americans are already being left out of the housing market and that’s exacerbating levels of inequality in this country,” says Lawrence Yun, chief economist and senior vice president of research at the National Association of Realtors. “There’s a kind of urgency now within the housing community to bring younger African American buyers into real estate.”

Despite a decade of economic growth in the United States, including record low unemployment and higher wages for black workers, millennials of color make up only a small portion of the overall market for real estate, data show.

This cannot be good. Even as other economic figures might be good, owning a home offers a key way for Americans to build wealth over time. Going further, not having a home means being at the whim of landlords, perhaps more instability regarding having housing, and limited access to wealthier communities where a majority of residents own homes. Furthermore, this data suggests not much has changed in 50 years; does this hint that the gap between groups in the United States remains relatively unchanged?

If the next generation of young adults is struggling to purchase homes, that suggests the problem will continue for at least another 10-20 years. If there are politicians serious about fighting inequality, wouldn’t this be a good issue to take up, particularly given the persistent gaps between black and Latino homeownership and white homeownership?

Looking for stories of millennials and young adults who want to and enjoy living in suburban homes

The suburbs are indeed changing – such is the premise of Curbed‘s “The Suburbs Issue.” And the lead story seems to fit into this argument: the suburbs are changing in that millennials are not so sure about buying a large suburban home. Here is the conclusion from that story:

Scocca concludes that the dream of having a big house built just for you was “never a very good dream anyway,” and that might be true, and maybe it’s not even a revelation. Houses have always been a location where we can project our hopes, dreams, and fears. No matter how much we try to rationalize the process of owning a house, the relationship is always a bit foggy, tinted by human emotion. It doesn’t seem possible to live somewhere for any meaningful length of time without imbuing it with your own nebulous ego. Over the past few months, I kept returning to this quote from novelist Helen Oyeyemi: “I think that houses, or at least the home part of them, are so much constructed that they’re simultaneously magical and haunted anyway.” Houses are not homes, and homes are not necessarily houses. Perhaps the real American dream is to find a sense of stability, safety, and acceptance. Maybe this is a downsized version of our parents’ American dream, or perhaps it’s just more honest, taking into account all the different stories we’re fed from the outside, and all the private stories we tell ourselves behind closed doors.

There is much truth here: homeownership in the suburbs is not such an obvious path for many young Americans due to financial insecurity, watching what happened to older generations, and different priorities about what they want to get out of life. Just because Americans prioritized suburban homeownership in the last one hundred years (and propped it up through policies and cultural ideology) does not necessarily mean this will continue in the future.

At the same time, is an article like this in a long line of suburban critiques that now stretch back roughly a century? Some of the same concerns are present: what makes a home (the happy suburban facade or the difficulties many people still face even when it looks like they have the American Dream), whether the suburbs are financially possible (beyond just homes, driving is expensive and giving children all sorts of advantages is encouraged), environmental effects (using more land, driving, building individual homes), and a lack of excitement or vibrant community in the suburbs.

All of this leads me to wondering about the millennials who are still moving to suburbs by their choice. Surely they exist. Surveys suggest many millennials want to own a home in the suburbs at some point. The homeownership rate recently increased, driven by millennial’s purchases. The population of millennials in big cities recently declined. Empirical data could settle whether millennials are not settling in the suburbs at the same rate as previous generations or might be doing so at a delayed rate (which would fit with other findings regarding emerging adulthood).

Is finding these suburban millennials not a priority because it reinforces the suburban ideology? If millennials do largely settle in suburbs, would this be viewed as a failure of American society on multiple levels? Would settling in denser suburban areas be enough to make amends for decades of urban sprawl and “the ghastly tragedy of the suburbs“? Or, might slight changes among millennials be an acknowledgement that reversing long-standing narratives about the good life – the American Dream – could take decades (just as it took time to develop suburbia as the ideal on a mass scale)? What if, in the end, Americans like suburbs for multiple reasons?

Considering housing shortages and gentrification together

An MIT economist looks at the relationship between gentrification and a shortage of cheaper housing:

Unsurprisingly, the geography of a place and the community residing there are linked. Along the most measurable dimensions, richer people tend to live in places with attractive geographies. Conversely, places with undesirable attributes like industrial or transportation pollution, poor access to jobs, and uninviting climates are usually left for the poorest and most marginalized.

Usually—but not always. Occasionally, physically attractive locations come to be occupied by low-income communities, immigrant communities, black communities. Neighborhoods like these are ripe for gentrification. Changes in labor markets, large investments by public or private institutions, or even just changing preferences among the wealthy move these neighborhoods into the sight lines of richer people, and then they gentrify.

The housing shortage, meanwhile, is a region-wide round of musical chairs, in which the winners sat down before the music even stopped. Whereas gentrification reshuffles which communities occupy which parts of the city, the housing shortage can operate at the scale of cities and regions as well as neighborhoods…

Policies introduced to fight gentrification—rent control and tenant protections—may ameliorate the effects of neighborhood change, but they won’t build new homes. We must allow new construction somewhere, despite the changes this will bring. Of course, we must do so in a way that avoids gentrification.

Four quick thoughts on this argument:

1. This reminds me of my post from the other day comparing the perspective that there is not enough housing and there is plenty of housing but it is not cheap enough. This piece suggests there are multiple housing issues at work and policies might tackle one particular issue and not others (or even make other housing issues worse).

2. Does the multiplicity of housing issues require that Americans prioritize which issue matters to them most? If middle-class people want cheaper housing, that will lead to different approaches (public policies, legislation, urban planning, decisions by developers, etc.) compared to a consensus that gentrification is not desirable. Historically, Americans have tended to prioritize housing for the middle-class (broadly defined) at the expense of housing for the poor or homeless.

3. To truly address all of these issues, metropolitan-wide approaches are needed. Individual neighborhoods or municipalities are often left to tackle these on their own even though decisions by nearby neighborhoods or municipalities have significant effects on their housing.

4. Additionally, a comprehensive housing policy is needed, not just one that tackles the most important or noisiest issue at the moment. On one hand, many Americans would not want the government to become involved in such issues even as the government has promoted suburban homeownership for roughly a century.

17% of millennial homebuyers regret the purchase (but perhaps 83% do not??)

A recent headline: “17% of young homebuyers regret their purchase, Zillow survey shows.” And two opening paragraphs:

Seventeen percent of millennial and Generation Z homebuyers from ages 18-34  regret purchasing a home instead of renting, according to a Zillow survey.

Speculating as to why, Josh Lehr, industry development at Zillow-owned Mortech, said getting the wrong mortgage may have driven that disappointment. For example, the Zillow survey showed 22% of young buyers had regrets about their type of mortgage and 27-30% said their rates and payments are too high.

The rest of the short article then goes on to talk about the difficulties millennials might face in going through the mortgage process. Indeed, it seems consumer generally dislike obtaining a mortgage.

But, the headline is an odd one. Why focus on the 17% that have some regret about their purchase? Is that number high or low compared to regret after other major purchases (such as taking on a car loan)?

If the number is accurate, why not discuss the 83% of millennials who did not regret their purchase? Are there different reasons for choosing which number to highlight (even when both numbers are true)?

And is the number what the headline makes it out to be? The paragraph cited above suggests the question from Zillow might be less about regret in purchasing a home versus regret about owning rather than renting. Then, perhaps this is less about the specific home or mortgage and more about having the flexibility of renting or other amenities renting provides.

In sum, this headline could be better. Interpreting the original Zillow data could be better. Just another reminder that statistics do not interpret themselves…

More upper middle class Americans are renting rather than owning

Homeownership is down in recent years in the United States (with a recent uptick) and this has affected even among relatively high-income earners:

Families such as the Bauerles who want to live in solid middle-class neighborhoods with good schools and reasonable commutes are increasingly renting single-family homes. Taking advantage of this trend, the private-equity firm Blackstone Group Inc., with other investors, launched a business that is now the nation’s largest renter of single-family houses.

The number of households that have inflation-adjusted annual incomes of $100,000 or greater but are renters nearly doubled from 2006 to 2016, according to the Joint Center for Housing Studies of Harvard University.

Domonic Purviance, a senior financial specialist at the Federal Reserve Bank of Atlanta, said people earning the median income can no longer afford the median-priced new home, costing $323,000 last year, and barely have the means to buy the median existing home, which now about $278,000.

The overall focus of the article in on the major sources of debt facing middle-class families today: housing, student loans, and cars. Out of this trio, the suggestion is that mortgage debt may come last out of these three. Many believe they need a college education (at least) for decent jobs and to maximize their earnings. A car loan is often a top priority as driving is necessary in many locations. Even if the majority of Americans desire to own a home, they can put that off until later.

Hence, renting is on the rise. This raises two big questions in my mind:

1. It could be interesting to see in the next few decades how upper middle class residents react to not having as easy access to homeownership. Will it turn them off to owning? Will they feel resentment and, if so, who do they think is to blame? Will this change spread to other groups since the upper middle class is one hat others would aspire to?

2. For the middle class and above, renting is often viewed negatively, particularly in wealthier communities. The perception is that renters are less invested in their community and property. If more people of means rent single-family homes instead of own them, could perceptions change?

Six Democrat candidates push new housing policies and it does not register at the latest debates

I have asked when the candidates for president will address housing and homeownership. Apparently, six Democrat contenders have – but it does not come out in public very often.

Last week, Amy Klobuchar became the latest Democratic presidential hopeful to say out loud that cities and towns need to let people build more housing. She joined Cory Booker, Julián Castro, and Elizabeth Warren in proposing a more active federal role in getting state and local governments to loosen zoning rules—a topic that, up to now, has not figured prominently in campaigns for the White House…

Most proposals advanced by Democratic candidates do not fit neatly along the traditional ideological spectrum from “laissez-faire” to “activist government.” Some of Warren’s proposals could be described as classic Democratic tax-and-spend policy making—she would use proceeds from raising the estate tax to increase funding for the Department of Housing and Urban Development substantially. Yet Warren’s plan to address “state and local land-use rules that needlessly drive up housing costs” is decidedly pro-competition—in keeping with her stated philosophy of making markets work better through stronger rules. Booker, Castro, and Klobuchar likewise balance more government spending with calls to reduce anticompetitive regulations. Only two candidates, Harris and Buttigieg, call for more demand-side subsidies without addressing supply constraints.

One idea notable for its absence among the candidates’ plans is the furthest-left option: an expansion of traditional public housing. Sanders, as a self-identified socialist, would seem the most likely to call for building more public housing, as some left-leaning think tanks have suggested. So far he has leaned toward fairly modest housing interventions, emphasizing local government tools such as community land trusts and inclusionary zoning.

There is still an opportunity here for at least one candidate to really push on this issue. As the article notes, the cost of housing is one that many voters consistently think about, particularly in higher-cost cities and regions. Even in markets with lower housing costs, the price of a mortgage or rent is one of the biggest expenses a household will face.

Perhaps the issue is that no candidate has found a simple tagline or slogan regarding housing that could apply everywhere? Since so much about housing and regulations is local, even large-scale government programs might require some complicated explanations. In the current debate format, this might be hard to relay. At the same time, these candidates are making plenty of speeches where they could hone a pitch about housing.

One way to do this would be to introduce housing as an inequality issue on multiple fronts. Where people can afford to live affects all sorts of life outcomes as well as long-term wealth. There is not a free market in housing: housing outcomes are the result of federal policy, local decisions made by municipal officials and business people, and the actions of consumers.

Black homeownership down to nearly 41% – and housing values down

The two largest minority groups in the United States are headed in different directions regarding homeownership:

While Hispanic homeownership rate is on the rise, the black homeownership rate has fallen 8.6 percentage points since its peak in 2004, hitting its lowest level on record in the first quarter of this year, according to census data.

This divergence marks the first time in more than two decades that Hispanics and blacks, the two largest racial or ethnic minorities in the U.S., are no longer following the same path when it comes to owning homes.

Analysts say black communities have struggled to recover financially since the housing crisis, which has kept homeownership out of reach. A decades long legacy of housing segregation has also made many would-be black buyers wary of returning to the market after losing their homes…

Homes in neighborhoods with a high concentration of white borrowers on average have seen their homes appreciate 3% from 2006 through 2017, according to the study. However, homes in neighborhoods with a concentration of black borrowers on average are worth 6% less than they were in 2006. High-income black borrowers have concentrated in neighborhoods where homes have lost 2% of their value, compared with white borrowers, who have concentrated in neighborhoods where homes have appreciated 5%.

According to the first quarter homeownership rates reported by the Census Bureau: whites have a rate of 73.2%, Hispanics are at 47.4%, and blacks are at 41.1%. These are off from peaks of 76.0% for whites in 2006, 50.1% for Hispanics, and 48.6% for blacks in 2006.

This is a contributor to inequality that gets relatively little attention. If homeownership rates are low for a particular group, not only does that mean a different present experience (renting versus owning), it has significant long-term consequences for building wealth. When whole neighborhoods have relatively low homeownership rates plus the properties there do not appreciate much, the effects can last decades.

Where are the 2020 presidential candidates in discussing homeownership as an issue Americans care about?