As a foundation of the American Dream, homeownership exemplifies both financial excellence and stability. However, beyond its financial benefits, the social aspect of homeownership, specifically minority homeownership, shouldn’t be ignored. The fact is that minorities own homes at far lower rates than that of their white American counterparts.
Moreover, Black Americans suffer from the lowest rates of homeownership across the United States. There are historical elements at play that have greatly impacted these statistics. However, the fact remains that minority homeownership offers life-changing opportunities and benefits that can span generations.
That said, if you’re a first-time home buyer looking to learn more about minority homeownership, you’re in the right place! Here’s everything you need to know about minority homeownership, from its history to its benefits, and everything in between.
The Essentials of Minority Homeownership in the U.S.
Homeownership has largely been considered one of the key markers of individual financial success. Through homeownership, one can house themselves, generate a higher net worth through equity, and begin a cycle of generational wealth that will benefit their family for years to come. However, history shows that homeownership in other demographics has outpaced minority homeownership at an alarming rate. Moreover, history also details the overwhelming obstacles to homeownership that minorities have faced, decade after decade.
Far from being deterred by these obstacles, minorities have worked hard to overcome these obstacles. In fact, minority homeownership is on the rise from 2016 to 2020. However, the rate of minority homeownership is still significantly lower than that of non-Hispanic white alone homeowners. For example, in the second quarter of 2020, Black homeownership was the lowest rate of all races represented in the U.S. census. It was up to 20.9% lower than the highest rate of homeownership among white homeowners.
Let’s contextualize this information.
Minority homeownership rates are the result of systemic oppression against people of color. Though the government has long since garnered a reputation for facilitating homeownership amongst its citizens, not all citizens were meant to benefit. Additionally, private institutions such as banks, mortgage lenders, and even sellers themselves discriminated against people of color during their attempts to become homeowners.
All this culminates into an unsurprisingly low rate of homeownership among minorities largely fueled by the repeated sabotage of generational wealth building attempts made by minorities, specifically Black Americans. However, the story doesn’t end there. Though facing significant obstacles, minorities have increased their rate of homeownership starting from 1994.
Why is Minority Homeownership Important?
Though homeownership is widely known as the foundation of upward mobility in the U.S, its benefits are not limited to a single metric. The truth is that homeownership provides both the homeowner and their family’s with a plethora of economic opportunities and stability that can resonate for generations to come.
The benefits of homeownership are, in some ways, more substantial for minorities because minorities typically start from a less advantageous economic position. From the accumulation of wealth to non-financial benefits, homeownership for minorities is more than just being handed keys to a property. It’s akin to being handed the keys for success. Here’s a breakdown of the key benefits of minority homeownership.
Increased Net Worth
The purchase of a home can greatly increase an individual’s net worth. A residential property is factored into your net worth as an asset. For many, their home is the most valuable asset they own. The median net worth of a homeowner sits at $231,400, according to data from 2016. However, the network of renters is a low $5,200.
This data plainly supports the fact that homeownership offers families significant financial benefits. This is even more true for minorities. Data shows that the net worth of white families is around $171,000, while the net worth of a Black family is just under $17,500. A large part of this disparity is due to the fact that more white families own homes than Black families.
However, a disparity exists for all minorities. White families have more wealth and own more homes than any other racial group in this country. In short, minorities face an extreme wealth gap. Homeownership offers minorities a clear path to net worth growth, even through little known avenues. These include the protection from rising housing costs and the necessary saving that one has to do to maintain ownership of their home.
Build Generational Wealth
Generational wealth is the wealth that keeps giving. Aside from just putting yourself and your family in a better financial position, homeownership gives you an asset that you can pass down to your descendants, such as your children, grandchildren, or other relation. Generational wealth provides drastically improved chances of upward mobility, financial stability, and career opportunities that would not have been possible otherwise.
Whether it’s the ability to sell the home to fund educational opportunities or the chance to create savings funds by reducing housing costs, minority homeownership is a great way to invest in your family’s future.
Like the wealth gap, minorities have to contend with a generational wealth gap that contributes to cyclical poverty and limited social mobility. That’s not to say that minorities haven’t tried to build generational wealth — they have. However, those attempts to build generational wealth have been wholly undermined by systemic discrimination, redlining, government failures, and other deterrents. The result is a push to build generational wealth by making high-yield real estate investments, namely the purchase of your first home.
Though the financial benefits of minority homeownership are well-documented, there are additional social benefits that warrant mentioning. Homeownership reduces residential mobility. Homeowners are generally incentivized to reside at their homes for long periods of time, whether through loan forgiveness or appreciation.
Living in one place for a long time allows homeowners to benefit from improved housing quality as they invest in their spaces, give more to the community, and utilize their economic stability to create better opportunities for their children.
Down Payment Programs for First-time Home Buyers
Understanding the benefits of homeownership is often enough incentive for individuals to get serious about their homeownership pursuits. For those in the favorable position of being a first-time homebuyer, there are many programs designed to make your journey to homeownership easy. These programs are generally aimed at reducing the biggest hurdle of homeownership — the down payment.
Down payments are typically expected to be anywhere from 10% to 20% of a home’s sale price. According to data from FRED, the median home price across the U.S. is $313,200. A down payment on a home could be between $31,300 and $62,600, which doesn’t include closing costs and other related fees. As suggested by the data above, most minority home-buyers don’t have that kind of money lying around. Luckily, where there’s a will, there’s a way.
It’s crucial for minority homebuyers leveraging down payment programs is an essential step of the home buying process. There are a plethora of down payment financing programs available to first-time home buyers. They are generally in the form of grants or loans.
- Grants which don’t have to be paid back.
- Loans to be paid down alongside your mortgage, can be forgiven after a time, or one’s that only need to be paid once certain deferment conditions are met (selling, moving, or refinancing)
The following loans reduce your down payment:
To find grants that can be used to cover down payments, you’ll have to do a bit of research because those grants are often offered on a hyper-local level. That means searching local government agency websites for information regarding available grants.
However, a simple Google search with the name of the city or town that you are looking to purchase a home + “down payment grants” is likely to yield some results. If you prefer a more analog method, call the city hall in your area to ask about their first-time homebuyer programs.
Finally, Mortgage Reports has an excellent resource for searching for down payment programs by state.
Though it’s easy to describe the benefits of minority homeownership and discuss how one can achieve this goal, it does not take into account the real-life obstacles and difficulties that minorities face when purchasing a home. Whether it’s a challenge finding the right financing option or not knowing which neighborhood would best suit you and your family, it’s crucial to have an expert guide to help you. That’s where a real estate agent comes in.
Real estate agents have the expertise and knowledge to help you get the most out of your home purchase. They are there to guide, advise, and answer all your questions. That said, when it comes to being a first-time homebuyer, you want to work with someone who prioritizes transparency and is ready to use their expertise to your advantage.