Black Applicants More Than Twice as Likely as Whites to be Denied Home Loans
Latest Zillow analysis shows minority groups struggle to access credit, and home values in minority neighborhoods were disproportionately affected in housing boom and bust
- In 2013, 27.6 percent of blacks and 21.9 percent of Hispanics who applied for a conventional mortgage were denied, while only 10.4 percent of white applicants were denied.
- Nationwide, home values in predominantly Hispanic neighborhoods fell an average of 46.3 percent from the pre-recession peak to the bottom of the market. Over the same period of time, home values fell by 32.1 percent in largely black communities, by 23.6 percent in largely white areas, and by 19.2 percent in mostly Asian areas.
- Home values in both black and Hispanic communities nationwide also have farther to climb before getting back to peak levels, while home values in white and Asian neighborhoods have returned or nearly returned to their peak levels.
SEATTLE, Feb. 9, 2015 /PRNewswire/ -- Black and Hispanic homeowners have a harder time securing a home loan[i] and face a steeper climb to a full housing recovery than white and Asian homeowners[ii], according to Zillow's latest analysis of race and homeownership data.
Zillow's updated analysis of housing value[iii] and federal mortgage denial data by race reveals persistent housing performance and access-to-credit issues for racial and ethnic minorities across the country. For the first time, Zillow studied this important data on a metro level.
"While many of the disparities between the experiences of white communities and minority communities during the housing boom and bust can be explained by plain differences in finances and geography, it's clear that the housing playing field remains strikingly unequal in this country," said Zillow Chief Economist Stan Humphries. "Black and Hispanic applicants for conventional home loans make roughly $20,000 less per year than white applicants, resulting in much higher denial rates. Similarly, black and Hispanic communities are clustered in areas that saw huge run-ups in home values prior to the recession, and even larger drops during the crash. But there are some reasons for optimism. Home values in black and Hispanic communities are expected to rise faster over the coming year, and the data shows that Federal Housing Administration-backed loans have proven to be a viable and critical source of financing in minority communities."
The discrepancy is most intense in some of the nation's most volatile markets. Home values in both black and Hispanic communities in the Los Angeles area remain more than 20 percent below their pre-recession peaks, while homes in L.A.'s Asian communities have appreciated beyond those peaks and homes in white neighborhoods are almost at peak levels.
Some of the patterns revealed in the data can be explained by geography. For example, many Asian neighborhoods are on the West coast, in some of the country's hottest housing markets, which can help explain why home values in Asian communities have risen faster and further than in other neighborhoods. Similarly, many Hispanic-dominated communities are located in volatile housing markets in the Southwest and Southern California, which can explain their rapid appreciation during the boom and steep fall during the bust.
The disparity in loan approvals is likely tied to a number of factors, including income. Applicants who belong to racial minority groups fare better when they apply for government-backed FHA loans than conventional loans.
The homeownership rate in the U.S. is 63.5 percent overall[iv]. The rate among whites is 71.1 percent; Asians, 57.8 percent; blacks, 41.9 percent; and Hispanics, 45.2 percent.
| Metro Area |
Conventional loan denial rate, all applicants |
Conventional loan denial rate, Asian applicants |
Conventional loan denial rate, black applicants |
Conventional loan denial rate, Hispanic applicants |
Conventional loan denial rate, white applicants |
| United States |
12.4% |
13.3% |
27.6% |
21.9% |
10.4% |
| New York-Northern New Jersey |
15.2% |
16.4% |
29.0% |
25.2% |
12.8% |
| Chicago, IL |
12.6% |
13.1% |
32.1% |
24.9% |
10.1% |
| Los Angeles, CA |
13.4% |
14.4% |
21.6% |
17.5% |
11.5% |
| Dallas-Fort Worth, TX |
9.7% |
10.3% |
17.7% |
16.5% |
7.9% |
| Houston, TX |
10.2% |
12.5% |
19.6% |
16.6% |
7.6% |
| Washington, DC |
8.1% |
9.8% |
17.5% |
14.0% |
5.6% |
| Boston, MA |
8.2% |
9.9% |
22.8% |
17.9% |
7.1% |
| Atlanta, GA |
12.3% |
13.4% |
25.3% |
19.1% |
8.9% |
| Philadelphia, PA |
9.8% |
12.6% |
21.1% |
16.7% |
8.0% |
| Seattle, WA |
10.0% |
12.3% |
18.5% |
16.2% |
8.7% |
| San Francisco, CA |
9.8% |
12.8% |
21.1% |
16.4% |
7.2% |
| Denver, CO |
7.7% |
10.8% |
16.4% |
13.5% |
6.5% |
| Minneapolis-St Paul, MN |
6.5% |
9.1% |
17.6% |
14.5% |
5.6% |
| Miami-Fort Lauderdale, FL |
21.2% |
21.9% |
29.2% |
23.6% |
17.9% |
| Phoenix, AZ |
10.7% |
12.4% |
14.2% |
16.6% |
9.5% |
| Detroit, MI |
12.9% |
13.4% |
26.9% |
15.0% |
11.7% |
| Portland, OR |
7.3% |
9.7% |
14.9% |
12.1% |
6.7% |
| San Diego, CA |
10.6% |
11.8% |
13.1% |
13.7% |
9.4% |
| Austin, TX |
8.2% |
9.3% |
15.3% |
15.0% |
6.9% |
| St. Louis, MO |
10.3% |
12.6% |
31.0% |
21.3% |
8.8% |
| Riverside, CA |
14.1% |
18.2% |
18.7% |
16.8% |
10.9% |
| Charlotte, NC |
10.1% |
9.9% |
21.8% |
20.5% |
8.0% |
| Tampa, FL |
16.1% |
18.3% |
31.6% |
23.3% |
13.8% |
| Baltimore, MD |
8.3% |
11.9% |
18.7% |
12.9% |
6.6% |
| Kansas City, MO |
7.4% |
7.9% |
19.0% |
19.8% |
6.5% |
| Nashville, TN |
9.9% |
15.6% |
22.9% |
16.2% |
8.9% |
| Sacramento, CA |
10.0% |
14.8% |
14.4% |
13.8% |
8.0% |
| Columbus, OH |
11.3% |
13.2% |
24.5% |
21.9% |
9.8% |
| San Jose, CA |
9.7% |
10.6% |
13.6% |
15.8% |
8.1% |
About Zillow:
Zillow, Inc. (NASDAQ: Z) operates the largest home-related marketplaces on mobile and the Web, with a complementary portfolio of brands and products that help people find vital information about homes, and connect with the best local professionals. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow's Chief Economist Dr. Stan Humphries. Dr. Humphries and his team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Zillow also sponsors the bi-annual Zillow Housing Confidence Index (ZHCI) which measures consumer confidence in local housing markets, both currently and over time. The Zillow, Inc. portfolio includes Zillow.com®, Zillow Mobile, Zillow Mortgages, Zillow Rentals, Zillow Digs®, Postlets®, Diverse Solutions®, Mortech®, HotPads®, StreetEasy® and Retsly™. The company is headquartered in Seattle.
Zillow.com, Zillow, Postlets, Mortech, Diverse Solutions, StreetEasy, HotPads, and Digs are registered trademarks of Zillow, Inc. Retsly is a trademark of Zillow, Inc.
[i] Zillow examined 2013 data released under the U.S. Housing Mortgage Disclosure Act.
[ii] Zillow categorized ZIP codes by race, according to the racial or ethnic group with a majority share of the population (2013 American Community Survey). For each month, we estimated the weighted average median home value within these ZIP code subsets, where each ZIP code is weighted by the number of group members within its boundaries.
[iii] To determine home value, Zillow uses the Zillow Home Value Index: the median estimated home value for a given geographic area on a given day and includes the value of all single-family residences, condominiums and cooperatives, regardless of whether they sold within a given period. It is expressed in dollars, and seasonally adjusted.
[iv] 2013 1 Year American Community Survey data.
SOURCE Zillow, Inc.
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