SEATTLE, Sept. 14, 2020 /PRNewswire/ -- (NASDAQ: RDFN) — Home prices in neighborhoods where Black people bought homes in 2019 were up 7% in July, according to a new report from Redfin (www.redfin.com), the technology-powered real estate brokerage. That's higher than the 6% price increase in neighborhoods where white people purchased homes last year. The pace of price growth remained unchanged from pre-pandemic rates in February in both groups of neighborhoods.
For this analysis, Redfin used data on home sales during the pandemic looking separately at Census tracts where Black people bought homes in 2019 and neighborhoods where white people bought homes in 2019, according to the Home Mortgage Disclosure Act (HMDA) data. Neighborhoods where Black people bought homes and neighborhoods where white people bought homes are not mutually exclusive.
In the months since the pandemic spread across the U.S. (May to July) home sales fell 15% from last year in neighborhoods where Black people bought homes. Meanwhile, home sales fell 13% in neighborhoods where white people bought homes. Before the pandemic in February, sales were up in both types of neighborhoods, but were growing twice as fast in neighborhoods where white people bought (8%) as in neighborhoods where Black people bought (4%).
"There may also be an increase in gentrification of neighborhoods where Black people bought homes," said Redfin chief economist Daryl Fairweather, who authored this report. "Black people have struggled more than white people to make mortgage and rent payments during the pandemic. Investors may see that as an opportunity to buy up affordable homes and apartments and renovate them to appeal to wealthier buyers and renters, further reducing the number of affordable homes available to Black people."
She continued, "This pandemic-driven recession is already disproportionately hurting Black American employment with the Black-white jobless gap widening. After the 2008 recession, the Black-white homeownership gap widened by 5%. And after the pandemic ends, the Black-white homeownership gap may worsen even more than it did following the 2008 recession."
The higher price growth and deeper sales decline in neighborhoods where Black people bought homes has likely been due to bigger declines in homes being listed for sale, with new listings down 19% year over year in July, compared to a 12% drop in neighborhoods where white people bought homes. Both types of neighborhoods were experiencing declines in new listings in February, before the pandemic began, down 9% year over year in neighborhoods where Black people bought homes and down 6% year over year where white people bought.
"During the pandemic, many homebuyers have been looking to live in more affordable suburban and rural areas because of the new normalization of remote work," said Fairweather. "But only 20% of Black workers can do their jobs remotely compared to 30% of white workers. This means that Black homebuyers are less likely to relocate away from the neighborhoods where they bought homes before the pandemic began. And because those neighborhoods have seen steeper increases in prices and larger declines in new listings, Black homebuyers are at a bigger disadvantage than white homebuyers during the pandemic."
Investors crowding out first-time homebuyers in Newark
Newark saw the biggest annual home price increase (14%) in neighborhoods where Black people bought homes. Meanwhile, in Newark neighborhoods where white people bought homes, price growth was up 6% year over year. Home prices were already rising quickly in neighborhoods where Black people bought in Newark even before the pandemic began—back in February 2020 home prices were up 12% year over year in neighborhoods where Black people bought, and up only 5% year over year in neighborhoods where white people bought.
"The vast majority of homebuyers in Newark are investors," said local Redfin agent Marci Macedo.
Only 23% of homes are owner-occupied in Newark compared to 64% nationwide. The number of new listings in July declined 13% in neighborhoods where Black people bought homes, but increased 1% where white people bought in Newark from last year. Homebuyers in Newark have to compete for the few available homes for sale with investors looking for safe long-term investments during the pandemic driven recession.
Home sales down 32% in San Francisco neighborhoods where black people bought homes
Home sales were down the most in July in neighborhoods where Black people bought homes in San Francisco, where home sales were down 32% from a year ago. By comparison, home sales were down 8% year over year in neighborhoods where white people bought homes in San Francisco. In July, price growth was up more in neighborhoods where Black homebuyers bought (up 2% year over year) compared to neighborhoods where white people bought (up 1% year over year). San Francisco is the second least affordable metro in the country for Black residents. Only 34 Black people bought homes in San Francisco in 2019, compared to 1,992 white homebuyers, according to mortgage origination data.
The lack of home sales in San Francisco is not due to a lack of listings, but due to a lack of demand as San Franciscans leave the city. New listings were up 14% year over year in neighborhoods where Black people bought homes. Meanwhile, new listings were up 11% year over year in San Francisco neighborhoods where white people bought homes. Before the pandemic, new listings were falling—down 8% in neighborhoods where Black people bought and down 2% in neighborhoods where white people bought.
As highly paid tech workers leave San Francisco during the pandemic, there could be a reversal of gentrification. San Francisco rents are falling, and home prices may soon follow, making San Francisco a more affordable place to live for both Black and white residents.
To view the full report, including charts and methodology, please visit: https://www.redfin.com/blog/black-homebuyers-more-impacted-by-housing-shortage-rising-prices/
Redfin (www.redfin.com) is a technology-powered residential real estate company, redefining real estate in the consumer's favor in a commission-driven industry. We do this by integrating every step of the home buying and selling process and pairing our own agents with our own technology, creating a service that is faster, better and costs less. We offer brokerage, iBuying, mortgage, and title services, and we also run the country's #1 real estate brokerage search site, offering a host of online tools to consumers, including the Redfin Estimate. We represent people buying and selling homes in over 90 markets in the United States and Canada. Since our launch in 2006, we have saved our customers over $800 million and we've helped them buy or sell more than 235,000 homes worth more than $115 billion.
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