The American economy has recovered from the coronavirus recession. Home prices have soared to record highs. The stock market is on fire. Many employees remained employed during the pandemic.
However, poorer Americans have not fared so well – and any analysis of inequality in the US economy leads to a racial divide in home ownership and wealth. The home ownership gap is one of the most obvious disparities, but the economy remains unequal in many ways.
Black families are less likely to own homes or stocks, and that means African Americans are likely to have lost ground compared to white families.
“We won’t know exactly what happened for about a year, but all indicators suggest that the wealth gap has widened,” says Margaret Simms, an economist at the Urban Institute. “During the Great Recession, the decline in wealth among black families was almost twice that of white families.”
While the official results are still to come, here are nine metrics showing persistent disparities:
1. The home ownership gap remains large.
As it has been for decades, the home ownership gap is a yawning gap. In the first quarter of 2021, a full 73.8 percent of white Americans owned their homes, according to the US Census Bureau. In the first quarter of this year, only 45.1 percent of African American people were homeowners, a gap that has persisted for years.
As home prices skyrocket during the pandemic, this inequality in home ownership is being reflected in the economy – and deepening racial segregation. Property values are rising at record speeds, building wealth for those who own a home.
“For the average American with wealth, most of it comes from home,” says Simms.
If your home was worth $ 400,000 before the pandemic and it’s up 15 percent over the past year, congratulations – you’ve just accrued $ 60,000 in new wealth. However, if you don’t own a home, you haven’t gained any equity during the housing boom.
2. The affordability gap is also large.
Home prices soared during the pandemic, creating affordability challenges for Americans of all races. However, the pressures are particularly tight for African Americans, who on average have lower incomes.
Only 43 percent of black households can afford to buy a home, compared with 63 percent of white households, according to a February report by the National Association of Realtors.
3. Black households are more burdened with student debt.
Student debt has forced many millennials to postpone home buying, but this challenge is particularly acute among black families.
Black households are more than twice as likely to have debt as white households – 43 percent versus 21 percent, according to the National Association of Realtors.
And the tab is higher for black borrowers. The average student loan debt is $ 40,000 for black households compared to $ 30,000 for white households.
Simms sees higher student debt as a symptom of overall less prosperity. Black parents are less likely to have the means to fund their children’s education, which means many African Americans borrow more money to go to college – and therefore start their careers with fewer opportunities to save for down payments.
4th Black mortgage borrowers are less likely to get the best deals.
Among African Americans moving home, many have home loans that are more expensive than mortgages that white borrowers get. An analysis by the Pew Research Center found that only 60 percent of black borrowers had interest rates of 4.9 percent or less.
5. Black borrowers are more likely to pay higher mortgage rates.
The other side of the mortgage coin, 39 percent of African American borrowers have interest rates of 5 percent or more, compared to just 28 percent of white borrowers.
6th Black unemployment is still high.
In another ongoing trend, black workers are more likely to be unemployed than white Americans. In May, the unemployment rate for black Americans was 9.1 percent, compared with 5.1 percent for white workers.
7th The wealth gap remains.
Black families have fewer wealth than white households. The typical white family had a net worth of $ 188,200, but the middle black family’s only $ 24,100, according to the latest Federal Consumer Finance survey.
The wealth gap acts as an obstacle to home ownership. Black families have less money to pay for down payments and have fewer homes to buy through loans from parents or grandparents.
8th. Fewer black workers save for retirement.
In a metric that measures racial inequality in both job quality and wealth, only 45 percent of African American workers participate in employer-sponsored retirement plans, compared with 60 percent of white workers.
9. Overall, African Americans can expect poorer health.
African Americans born in 2020 have a six-year shorter life expectancy than white Americans, according to a recent report from the Centers for Disease Control. This discrepancy reflects systemic inequalities in access to health care.
What You Can Do: Bridge the Wealth Gap
It is true that there is not much that an individual can do to tackle systemic inequalities. But there are ways for borrowers to turn the mortgage game in their favor. Four strategies:
- Boost your credit score. This is the primary benchmark used by lenders to set interest rates. The higher your score, the better you get a mortgage. One caveat: this is not a quick fix. Depending on your financial situation, it can take months or years to process your credit history.
- Shopping spree. Even for borrowers with excellent credit ratings, interest rates and closing costs can vary widely depending on the lender. For borrowers with imperfect credentials, shopping becomes more important. Don’t limit your purchases to brick and mortar stores – the best deals often come from lenders who don’t have an office near you.
- Benefit from record low prices. Millions of Americans of all races could but have not benefited from refinancing, according to research by mortgage data company Black Knight. African Americans could be overrepresented in this figure.
- Discover utility programs for first-time home buyers. Many states and some cities offer grants and loans to help with closing costs or down payments. These programs often define newbies as those who have not owned any property in the past three years.
Learn more
source https://collegeeducationnewsllc.com/9-charts-that-illustrate-americas-racial-wealth-gap/
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