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Affordability Issues Widen the Homeownership Gap

Despite a year of financial challenges and setbacks, the rate of homeownership remained the same, as did many of the disparities that exist in homeownership, according to NeighborWorks America's 2021 Housing and Financial Capability Survey.

The Survey found that 62% of Americans own a home, with Black homeownership remaining the lowest among those surveyed. According to the findings, 42% of Black adults own a home, a rate virtually unchanged from one year ago, compared to 69% of white adults and 53% of Hispanic or Latinx adults. Black adults face some of the biggest obstacles to buying a home, with 63% saying they don't think they would be approved to buy a home by a bank or credit union.

"The opportunity to pursue the American Dream of homeownership is still too limited, especially in communities of color across all income brackets," said NeighborWorks America President & CEO Marietta Rodriguez. "NeighborWorks America and the NeighborWorks network work hard every day to open up the path of homeownership to all those who wish to pursue the dream of owning their own home."

Key findings in the study include:

  • Most Americans’ financial priorities and concerns have not changed dramatically over the past year. Americans are largely focused on managing everyday financial realities rather than future goals.
  • There remain important, persistent socioeconomic disparities in financial preparedness and capabilities in America. Different types of households do not have equal access to financial tools, information, or emergency funds.
  • There is significant interest in (and expressed need for) guidance in key financial areas like saving, budgeting, building credit, and paying down debt. The need and the interest are particularly high among young people.
  • The rate of homeownership has not changed significantly over the past year, nor have some clear socioeconomic disparities in ownership. About as many Americans are looking for a new place to live as a year ago—roughly one in three. Affordability remains the most common top priority, but home and neighborhood security have closed the gap significantly in the past 12 months.
  • Many Americans are interested in guidance and information to help move toward homeownership, but there are important barriers in the way. Most non-owners have too much debt or cannot afford a down payment, and the steps toward homeownership are complicated.

Digging deeper into the findings, the Survey shows that 73% of people who’ve been financially challenged by the pandemic say it will take six months or more to recover, and 46% say it will take a year or more. Approximately 43% of Black non-homeowners have had financial applications denied due to a credit score.

With more than one-in-three Americans (36%) are looking for a new place to live, most Americans see the benefits of owning a home, with 89% agreeing that owning a home gives or would give them a sense of safety and security.

The Survey makes a strong case for credit as a leading cause in widening the gap in homeownership and wealth disparities between Black, Hispanic or Latinx, and white Americans. Among all Americans, 31% have had financial applications denied or delayed due to their credit score—including 41% of Black adults, 39% of Hispanic or Latinx adults, and 36% of low-income earners. In contrast, just 27% of white adults have had a financial application denied because of a credit score. These problems are more acute for non-homeowners, with 43% of Black non-homeowners having had financial applications denied because of a credit score. Another 36% of non-homeowners do not know their credit scores.

In terms of taking the proper steps toward the path to homeownership, 50% of Americans said they want to take classes to improve their financial situation, including 66% of Black adults, and 56% of Hispanic or Latinx adults. Among non-homeowners, 58% would be interested in receiving information on the homebuying process. This interest is particularly strong among Black non-homeowners, 68% of whom would be interested in this information. Non-homeowners are also in need of guidance to achieve their financial goals, including acquiring and using credit (63%), budgeting (63%) and reducing debt (59%).

NeighborWorks America's 2021 Housing and Financial Capability Survey was conducted online from April 19 to 28 among 1,603 adults, ages 18 and older, including oversamples for Black, Hispanic or Latinx and Asian adults. Data are weighted on seven demographic variables to reflect the composition of the U.S. adult population.

Click here to access the complete NeighborWorks America's 2021 Housing and Financial Capability Survey.

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.
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