The number of Black renter households who can afford to buy a median-priced home has slid by more than half in the past year, according to a blog post from a research analyst at Harvard University’s Joint Center for Housing Studies — showing another consequence of the unequal burdens borne by families of color as the cost of living soars.
While overall home prices have cooled from an earlier pandemic boom in response to rising mortgage rates, the jump in rates has nonetheless driven monthly housing payments to an unsustainable level for some households looking to buy.
As rates rose by nearly 2 percentage points from April 2021 to April of this year, hitting 4.98%, the monthly payment on a median-priced home including mortgage, estimated property tax and insurance costs grew by 35%, translating to potentially several hundred dollars in extra spending each month, according to Raheem Hanifa of the Joint Center for Housing Studies.
“Since 2020, the monthly mortgage payment [on a median-priced home] has increased from $1,400 to $2,800, and that increase has priced out a lot of potential homebuyers — particularly Black potential homebuyers have been priced out of being able to afford a home due to the increase,” Hanifa told MarketWatch.
Last April, a household needed an annual income of at least $79,570 to swing monthly payments on a median-priced home around $341,000, Hanifa noted in his blog post. Within a year, the median home price shot up to $402,000, meaning a household needed to make $107,500.
“The number of Hispanic renter households who could afford a median-priced home dipped by 50%, while the number of white renter households who could afford to buy fell by 42%.”
It’s a shift that could push Black renters away from opportunities at homeownership, according to Hanifa. That’s particularly concerning since the gap between Black and white homeownership rates has actually worsened since 1960, before the Fair Housing Act was even law, according to the Urban Institute, a center-left think tank.
The number of Black renter households who could afford a median-priced U.S. home declined by 52% from April 2021 to April 2022, according to Hanifa’s analysis of American Community Survey data. The number of Hispanic renter households who could afford a median-priced home dipped by 50%, while the number of white renter households who could afford to buy fell by 42%.
“We definitely know that homeownership has been the primary way that American households have built wealth over time,” Hanifa said, and homeowners over the last several years would have been able to build equity that translates into greater wealth. “That wealth can be used for rainy days. If you’re having a precarious financial situation, you can pull equity from the home; you can pass that wealth down to your kid and family,” he said.
“When you haven’t had those opportunities, you’re more at risk when you have a financial crisis of not being able to meet your financial obligations,” Hanifa added.
For some households, the rising cost of living is already a financial crisis. The median monthly asking rent surpassed $2,000 for the first time this year, according to Redfin, making saving for a home even more difficult for the families that were already paying close to the top of their budget.
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Emma Ockerman is a personal finance reporter for MarketWatch. You can follow her on Twitter at @EOckerman.
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