Blacks and Hispanics are less likely than Caucasians and Asians to apply for a mortgage to purchase a home in the first place, but when they do, they also are much less likely to be approved, according to a joint report by Zillow and the National Urban League.
?A House Divided: How Race Colors the Path to Homeownership? relied on Home Mortgage Disclosure Act data, the Zillow Home Value Index and a survey performed by Ipsos. It discovered a number of instances in which members of minority groups ? particularly blacks and Hispanics ? faced challenges and obstacles in homeownership that differed greatly from what white people experienced.
?The American dream of homeownership is not equally shared by all, even today. Our research shows that minority homebuyers are encountering difficulties that often aren?t shared by white homebuyers,? said Stan Humphries, chief economist for Seattle-based Zillow, an online real estate database.
?Even after they achieve the dream, they are less likely to see a similar return on their investment.?
For starters, while blacks make up 12.1 percent of the U.S. population, they filed 6 percent of all mortgage applications in 2012, according to the report. Hispanics make up 17.3 percent of the population, but filed 9.4 percent of the applications.
Whites, on the other hand, make up 63 percent of the U.S. populations and filed 64.8 percent of mortgage applications in 2012.
Blacks and Hispanics, in general, start the homebuying process with less income, which naturally leads to stark differences in the amount of down payment they are able to afford.
The report found blacks were more likely to put down 5 percent or less for a down payment on a house in 2012. The majority of Hispanics contributed 6 percent or more toward a down payment.
Asians were more likely to come up with down payments of 20 percent or more (48 percent of the population) followed by 33 percent of whites who made down payments of 20 percent or more.
Blacks and Hispanics are much more likely to apply for a Federal Housing Administration mortgage than a conventional loan. FHA loans allow borrowers to buy a home with as little as a 3.5 percent down payment. Most conventional loans require at least 20 percent down.
More than half of black applicants and Hispanic applicants applied for an FHA loan. Less than one-third of white applicants applied for an FHA loan.
The report found blacks and Hispanics also are more likely to endure a longer mortgage process, and are more likely than whites to have their mortgage application denied. Black applicants are 2.4 times and Hispanic applicants are 1.98 times more likely than white applicants to be denied.
Zillow used its own database to evaluate how the different races have fared in the housing boom and bust. Researchers categorized ZIP codes according to the racial or ethnic makeup of the majority of the population. The researchers found that not everyone experienced the crash and recovery in the same way.
Communities where Hispanics are the dominate population were hit hardest by the housing boom and bust, with home values falling 46.2 percent from the peak of the bubble to the bottom. Home values in Hispanic communities ? located primarily in California, Arizona and Nevada ? are still down 32.6 percent from their peak values as of November 2013.
Comparably, home values in predominantly black communities scattered across the nation fell 32.3 percent from their peak values during the worst of the recession. Homes in those communities remain 23.3 percent below the peak values in 2006.
Predominantly white neighborhoods saw home values fall an average 23.6 percent from their top prices in 2006, and those values are now 13.4 percent shy of their 2006 peaks.
Home values in Asian-dominated communities ? located mostly on the West Coast ? have completely rebounded for a full recovery to prices before the housing crash. Those home values had fallen 19.9 percent during the housing crisis, but today are only 0.6 percent below peak levels.
Source: MCT Information Services
