For a new report, Zillow calculated buying power [1] among major ethnic and racial groups to see what percentage of each group could afford a median-priced home on the median salary for their group without spending more than 30 percent of their income on housing. Homebuyers in 2017 were able to afford nearly three quarters of homes available for sale during the year, according to Zillow. However, buying power was not uniform across all groups.
“Distinct racial and ethnic gaps in homeownership exist nationwide, which could have long-lasting implications for future generations,” said Aaron Terrazas, Senior Economist at Zillow [2].
Asian buyers fared best, able to choose from 85.2 percent of homes. White buyers had the second-greatest buying power, able to afford 77.6 percent of homes for sale. Hispanic homebuyers could afford 64.9 percent of homes available.
Black homebuyers had the fewest options, able to afford just 55.3 percent of the homes available for purchase. It’s a disheartening statistic as the nation marks the 50th anniversary of the Fair Housing Act of 1968 [3].
"The divide between black and white Americans has proven stubbornly persistent across the long arc of American history, visible in incomes, accumulated wealth, and homeownership,” Terrazas said.
In April, Zillow reported their gap between black and white homeownership has actually widened since 1900, increasing from 27.6 percent to 30.3 percent. This is “despite years of policy efforts,” according to Zillow.
This gap is significant because homeownership is an important source of wealth-building in the United States. In fact, Zillow noted “more than half the overall wealth of American households is held in their primary residence.” Furthermore, “Black and Hispanic homeowners rely on their homes for wealth more than white homeowners do,” according to Zillow.
When examining market-level data, Zillow found that black homebuyers had less buying power than other major groups in all but three of the largest 35 housing markets in 2017.
In the New York/Northern New Jersey, Houston, and Boston markets, black homebuyers had slightly more buying power than Hispanic buyers.
In six of the largest 35 markets, black homebuyers could afford less than one-fourth of homes for sale.