Homes in Black Neighborhoods Twice as Likely to be Underwater as Homes in White Neighborhoods

A new Zillow analysis shows the different effect of negative equity on racial groups in the United States

- Twenty percent of homeowners in predominantly black communities were underwater in Q3 2016, nearly double the national rate of 10.9 percent.

- In half of the largest U.S. metros, homeowners in predominantly black neighborhoods are more likely to be underwater than homeowners in other neighborhoods.

- The negative equity rate in communities where the majority of residents are Hispanic was 12 percent in Q3 2016.

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Zillow

Jan 11, 2017, 07:00 ET

SEATTLE, Jan. 11, 2017 /PRNewswire/ -- Homeowners in predominantly black communities are twice as likely to be underwater on their mortgages as homeowners in mostly white communities, according to a new Zillow analysisⁱ.

Nationally, the negative equity rate in the third quarter of 2016 was 10.9 percentⁱⁱ. In Census tracts where the majority of residents are black, the negative equity rate was 20 percent, while in tracts where most residents are white, the rate was 9.9 percent. In Census tracts where the majority of people are Hispanic, 12 percent of homeowners were underwater. In places where there was no racial majority, 11.9 percent of homeowners were in negative equity.

Negative equity is a persistent reminder of the housing crash. After the housing bubble burst in 2007, homes in predominantly black and Hispanic communities lost more value than those in Asian or white neighborhoods. While strong home value appreciation during the recovery has helped many homeowners resurface on their mortgage debt, black and Hispanic communities have not had as strong of a recovery.

Underwater homeowners are stuck in their homes, unable to sell except for in a short sale or by paying the remaining balance on their mortgage, and the paralysis has far-reaching effects. When a large share of homeowners can't sell their homes, it limits the inventory of homes for the entire market, leaving fewer options for potential homebuyers.

"Negative equity is not an equal opportunity offender, with certain markets still being more affected than others," said Zillow Chief Economist Dr. Svenja Gudell. "Our previous research has shown that negative equity is more concentrated among less expensive homes, and now we know that it is also more prevalent in minority neighborhoods than in white communities, which are also trailing in the overall housing recovery. These gaps can and will have long lasting implications for growth and equality."

Negative equity is not evenly distributed among homeowners – homeowners in black neighborhoods are more likely to be underwater than any other race in half of the largest U.S. metros.

In Detroit, 12.2 percent of all homeowners were underwater in Q3 2016. However, 35.1 percent of homeowners in predominantly black communities were underwater, compared to 9.5 percent of homeowners in mainly white neighborhoods.

Metropolitan Area	Q3 2016 Negative Equity Rate	Negative Equity Rate in Majority White Communities	Negative Equity Rate in Majority Black Communities	Negative Equity Rate in Majority Hispanic Communities	Negative Equity Rate in Majority Asian Communities	Negative Equity Rate in Communities with No Racial Majority
United States	10.9%	9.9%	20.0%	12.0%	N/Aⁱⁱⁱ	11.9%
New York, NY	10.0%	8.8%	13.9%	20.6%	N/A	12.9%
Los Angeles-Long Beach-Anaheim, CA	5.7%	4.3%	N/A	7.0%	4.6%	5.9%
Chicago, IL	17.0%	13.8%	28.2%	22.8%	N/A	23.2%
Dallas-Fort Worth, TX	4.4%	4.1%	6.2%	5.7%	N/A	4.1%
Philadelphia, PA	11.8%	10.1%	19.6%	N/A	N/A	18.4%
Houston, TX	6.9%	6.8%	8.1%	6.5%	N/A	6.3%
Washington, DC	12.4%	9.4%	19.6%	N/A	N/A	13.6%
Miami-Fort Lauderdale, FL	10.6%	7.7%	16.3%	11.0%	N/A	11.5%
Atlanta, GA	13.0%	8.3%	27.7%	N/A	N/A	12.6%
Boston, MA	6.2%	5.8%	N/A	N/A	N/A	9.9%
San Francisco, CA	3.7%	2.5%	N/A	7.3%	3.1%	4.5%
Detroit, MI	12.2%	9.5%	35.1%	N/A	N/A	N/A
Riverside, CA	10.5%	10.5%	N/A	10.3%	N/A	10.2%
Phoenix, AZ	11.2%	10.2%	N/A	14.7%	N/A	14.2%
Seattle, WA	6.6%	6.2%	N/A	N/A	N/A	8.4%
Minneapolis-St Paul, MN	7.3%	7.0%	N/A	N/A	N/A	11.6%
San Diego, CA	6.3%	5.5%	N/A	7.0%	N/A	6.8%
St. Louis, MO	12.6%	10.8%	28.2%	N/A	N/A	N/A
Tampa, FL	10.5%	9.5%	N/A	12.7%	N/A	14.1%
Baltimore, MD	14.4%	11.5%	22.8%	N/A	N/A	18.3%
Denver, CO	4.4%	4.1%	N/A	5.7%	N/A	5.3%
Pittsburgh, PA	8.1%	8.0%	10.3%	N/A	N/A	N/A
Portland, OR	3.8%	3.7%	N/A	N/A	N/A	N/A
Charlotte, NC	8.1%	7.0%	12.3%	N/A	N/A	10.1%
Sacramento, CA	7.6%	6.6%	N/A	N/A	N/A	9.1%
San Antonio, TX	10.2%	8.6%	N/A	10.6%	N/A	11.1%
Orlando, FL	11.4%	9.4%	20.8%	14.1%	N/A	12.7%
Cincinnati, OH	10.8%	10.3%	19.9%	N/A	N/A	N/A
Cleveland, OH	14.6%	11.8%	36.8%	N/A	N/A	35.0%
Kansas City, MO	12.4%	10.5%	33.8%	N/A	N/A	25.2%
Las Vegas, NV	16.8%	13.4%	N/A	26.5%	N/A	18.0%
Columbus, OH	9.0%	8.2%	19.0%	N/A	N/A	12.0%
Indianapolis, IN	12.8%	11.8%	22.9%	N/A	N/A	18.0%
San Jose, CA	2.6%	1.7%	N/A	4.4%	2.6%	2.5%

Zillow

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i} To calculate the negative equity rate by race, Zillow examined census tracts in which homeowners of a given race represented the majority of homeowners in that given area. Tracts that had no majority were labeled as 'Mixed' (or 'No Majority' in the output), which was treated it as its own racial group.
ⁱⁱ http://www.zillow.com/research/q3-2016-negative-equity-report-13954/
ⁱⁱⁱ Some regional data is suppressed, because those regions do not have large enough populations of a given race.

SOURCE Zillow