Given the current hot housing market, it’s hard to believe that the subprime mortgage crisis, and the subsequent recession, happened only 10 years ago.
Black homeowners were hit especially hard during the recession, and yet, a new study indicates those who held onto their homes may be faring better than other homeowner groups.
How the subprime mortgage crisis affected black homeowners
The recent study, published by the Urban Studies Institute at Georgia State University, cites a broad range of research showing how black homeowners were disproportionately affected by the subprime mortgage crisis leading up to the recession. Among the findings:
- African-Americans were 103% more likely to receive subprime home purchase loans with significantly higher interest rates than white borrowers.
- For mortgages issued between 2004 and 2007, 28% of African-American home buyers lost their homes to foreclosure or were seriously delinquent by 2013—more than double the rate for white households.
African-American homeowners who bought homes at the height of the crisis fared the worst. In 2007, the median white buyer lost about $8,000 more than comparable renters, but the median black buyer lost $19,000.
These losses are at least part of the reason homeownership among African-Americans is at the lowest we've seen since the Fair Housing Act (FHA) was passed 50 years ago. "Even though stronger regulations have been put in place, it may take some time before some [black home buyers] regain confidence in the housing market," said Dan Immergluck, the GSU professor who led the research.
Perhaps the only silver lining in the study was the fact that African-American home owners who held onto their homes in 15 metro areas also saw some of the highest rates of property appreciation of all racial groups.
Home values rise for black homeowners
"In stronger-market metros, black buyers have tended to do fairly well since the recovery began," said Immergluck. To help put that in context, between 2012 and 2017, the median black homeowner saw their home's value rise by 38.2% compared to the 29.9% increase seen by white homeowners. It’s worth noting that the rise in home values has been particularly strong in diverse neighborhoods, as opposed to neighborhoods that are predominately African-American. This holds true across income brackets and tells a bittersweet story for the African-American community.
For African-American families who were able to weather the mortgage crisis and subsequent recession, they are closer to reaching economic parity with their peers. But since so few African-Americans actually own their homes, the property appreciation of the past six years has heavily benefited homeowners in other racial groups.
To balance homeownership and equity across all racial groups, Immergluck and his fellow co-authors recommend making sure Fair Housing Act standards are enforced, a strong Consumer Financial Protection Bureau advocates for borrowers of color and additional support be put in place for low-cost lending under the Federal Housing Administration to help close the racial wealth gap in America.