Black buyers are being squeezed out of the hot housing market

Jones, 48, planned to build equity by buying a house in the South Phoenix neighborhood where she grew up. Instead, she stands on the sidelines, faced with skyrocketing rent and struggles to restart the process of finding a place of her own.

“It was very depressing, very discouraging,” Jones said. “That’s the American Dream. Once you’ve bought a house, you feel like you’ve succeeded.”

Buying a home has never been more competitive or expensive for American families, with record high home prices and now skyrocketing mortgage rates, still well above 5%. According to Freddie Mac, the average monthly mortgage payment for a property purchased is up more than 30% from a year ago.

The market is pricing out new home buyers from all backgrounds, but black buyers face even greater barriers.

Studies show that black homebuyers are less likely to come from wealthy families, have more debt and pay disproportionately higher rent, making it more difficult to save for a down payment.

According to a Zillow analysis of data from the Home Mortgage Disclosure Act, black applicants were denied many more mortgages than other groups. Nearly 20% of black applicants were denied a mortgage in 2020, compared to 10% of white applicants. Credit history was the most common reason given to black applicants for being rejected.

This week, the Biden administration unveiled an action plan to increase the supply of affordable housing and reduce the housing shortage in the United States. Officials say it should reduce the housing shortage in five years.

But there are currently few programs to help Jones and other potential buyers who are struggling to afford a home.

That creates a huge hurdle in today’s hot housing market, where cash offers investors are buying more real estate to rent or sell than ever before. Investors bought a record 18.4% of U.S. homes bought in the last quarter of 2021, up from 12.6% a year earlier, according to a Redfin analysis of county records.

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In Phoenix, investors are particularly active, buying 28.4% of properties in the same time frame.

Jones spent nearly a year trying to buy her first home there. She had started saving money and was approved for an FHA loan that required only a 3.5% discount. But with less than $6,000 set aside for a down payment, Jones was unable to compete and eventually gave up looking.

“Every time I made an offer, every time I went to look at something, I was outbid, or someone had already taken it,” Jones said. “I just put it on the back burner because I can’t afford what’s out there now.”

Jones’ real estate agent Maisha Fair says many of her Phoenix clients face the same predicament.

“They can’t buy anymore. They’re stuck in the rental market,” Fair said. “And it harms those who live here.”

Some experts expect these market conditions to widen the racial homeownership gap.

Census data shows that nearly 45% of black families own their homes, compared to 74% of white families. The gap has hardly changed since the 1960s, when the Fair Housing Act banned discrimination in the housing market.

“Unfortunately, the homeownership gap has widened,” said Jessica Lautz, vice president of demographics and behavioral insights at the National Association of Realtors. “The pandemic has exacerbated everything. If we look at home ownership inequality, we see that black homebuyers are having a harder time entering the housing market as they have been hit harder by the pandemic.”

Owning real estate is the primary means for families to build wealth, and it has never been more valuable. The average white household owned 7.8 times more wealth than the typical black household as of 2019, according to the Hamilton Project, an economic policy initiative at the Brookings Institution.

“The homeownership gap will widen the wealth gap,” said Andre Perry, senior fellow at the Brookings Institution. “If people don’t buy houses, it will only make it more difficult for future generations to buy houses… If we ignore wealth, we are essentially burying our heads in the sand at the discrimination and barriers that keep many people out, even with high income, from buying a house.”

The skyrocketing rent costs could widen the racial wealth gap and drive more people out.

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Rents in the US hit a new record in April and are expected to continue rising. According to a report from, the national median rent was $1,827 per month, up 16.7% from a year ago.

“The market is definitely accelerating gentrification,” Perry said. “What that really means is that people will be pushed to suburbs with little wealth and few resources. That people will be further from their jobs and families will struggle.

In Phoenix, real estate agent Maisha Fair says investors aren’t just buying real estate, they’re driving rents so high that families are forced to relocate.

“They can no longer live in a neighborhood where they know their neighbors,” Fair said. “The same investors who come in and buy these houses for cash are now renting to the same people who wanted to buy the house,” Fair said.

Jones’ rent in Phoenix increased by $400 a month. She burned the $6,000 she set aside for a down payment after losing her job for a few months. Now she is much more focused on making ends meet than on making her dream of home ownership a reality.

“It’s all money… I can’t even afford to live there,” Jones said. “So yeah, it’s heartbreaking.”

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