Gap Between White and Black Families Able to Afford a Home Narrows

Finding the money to buy a first home has become a challenge for all would-be homeowners. But the once wide gap between Black and White families able to do so has narrowed in the last few years as home prices and mortgage rates have taken off, putting both groups at a disadvantage.

In 2022, the gap between White and Black families with sufficient income to afford a mortgage fell to 4.7 percentage points – a significant drop compared to the 7.9 percentage point gap ten years prior.

“This is because the proportion of mortgage-ready white families has decreased more dramatically during that time period – down from 34.6% in 2012. The change did not come from a disproportionately larger increase in homeownership among white families that caused the mortgage-ready share of white families to decrease more significantly,” Zillow stated.

In 2022, 7.8% of Black families who did not own their own home had the income to qualify for homeownership, according to a report from Zillow. By comparison, 12.5% of White families were in that position.

In the period 2012 to 2022, the median family income of Black renters rose 37.7%, while for Whites the increase was 35.1%.

In total, among all races, 6.3 million – compared to 12.9 million in 2021 — of 138 million American families who did not own their homes were considered mortgage-ready, meaning they had sufficient income to afford a typical mortgage payment without being cost-burdened. While some families choose to rent rather than buy, Zillow senior economist Orphe Divounguy, pointed to other obstacles to home-buying for aspiring Black homeowners. “It’s crucial to recognize the existence of additional barriers beyond monthly cost, including access to funds for a down payment and closing costs — as well as other barriers that significantly contribute to mortgage denials, like insufficient credit scores and lack of access to credit. These barriers especially impact people of color,” he noted.

Indeed, in 2022, the loan denial rate for Black applicants was 146% higher than for Whites, with credit history given as the usual explanation. White households owned homes at a 73% rate, compared to just 44% for Black households. In more than half the nation’s 50 largest metros the gap was 30 percentage points or more.

The typical value gap between White and Black-owned homes was 17.9 percentage points in 2022. In 42 of the top 50 metro areas the value of a typical home owned by a White family was more than 10 percentage points higher than that of a Black family.

Zillow’s analysis showed that many of the housing markets where Black families were most likely to be mortgage-ready are communities where home values are relatively low. These metros included Detroit, Memphis, St. Louis, Houston, Cleveland, Pittsburgh, Columbus, OH, Oklahoma City, Baltimore, Birmingham, and Indianapolis.

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