It’s not surprising that buyer frustration is extreme in the real estate market. The market prices in certain neighborhoods are much higher than they used to be a decade ago. Many buyers are scuffling to find sufficient cash to make a down payment. What’s even worse is someone is a minority. Studies have shown that less than a quarter of the houses across the country are owned by Hispanics, African Americans, or other minorities.
Discriminatory Housing Policies
The low rate of minority homeownership is because of discrimination in housing policies, market conditions, and financial problems. Residential segregation still continues. Residents choose to live in a neighborhood that comprises people of the same race.
The combinations of all these factors have led to problems in the housing field. These problems keep on perpetuating the barriers minorities are facing while purchasing a house.
Minorities Mortgages More than Whites
Hispanic and African American homebuyers tend to get turned down for a traditional mortgage loan. A study in 2016 showed that about 15.5% of the Hispanic applicants had been denied a traditional loan, while blacks were denied 21% times. Sure, the rates declined from 34% in 2007 but it still exists.
Asian applicants had been denied a mortgage in 10.4% cases in the year 2016. The denial of conventional loans seems to be the highest in Miami where 35% of the applicants are black. In fact, the rate is above 20% in Florida, Orlando, Detroit, and New York City.
For Hispanics, the denials are much higher in Ohio and Columbus 22% of them is denied applications. In Orlando, New York City, Miami, and Chicago, the Hispanic denial rate is 15%.
Albeit, the denial rate for Asian borrowers is quite lower, In Miami, they tend to get turned down 18% of the time.
Minority Neighborhoods Valued Less than Other Neighborhoods
The value of schools, buildings, and the land itself is linked to the perception of minorities. Black people want to live around other black people and this is the primary reason why there is a higher concentration of black people in a certain neighborhood. According to recent studies, the metropolitan homes in the US where the population is less than 50% black is valued half the home prices in the neighborhoods that don’t have black residents.
Most of the minority neighborhoods contain homes that are estimated to be $609 billion for the 32 million owner-occupied homes and this is at least $156 billion less than what it should have been.
The undervaluation for most of the minority neighborhoods is a cause of concern for cities. The country’s homeownership fervor has helped in precipitating the mortgage
crisis that targeted the neighborhoods of colors. However, home equity is still a primary source of collateral or capital help for growing a business or pay for college tuition.
There are various factors contributing to the disparity. For instance, lower credit and low income are contributing to the issue. Due to income discrimination, minority borrowers tend to have fewer choices when it comes to housing, particularly in an expensive market. This can increase the debt ratio that might disqualify them. This has led to the loss of a new generation of homeowners and the future appears to be quite bleak.