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June is National Homeownership Month, dedicated to recognizing the benefits of homeownership to our families, communities and country. A popular way to build wealth, homeownership offers the opportunity to create a better life and prosper, paving the path for future generations to succeed and also achieve the American Dream. Unfortunately, homeownership in America remains a struggle and enigma.
In a recent release, President Donald Trump stated, “In the years since the Great Recession, homeownership rates have dipped to historic lows. Many Americans are not confident they will ever own a home, a tragic consequence of a decade of weak economic growth, excessive regulations, and stagnant wages.
“Many young families are unable to achieve the independence they desire because they have difficulty saving for a down payment, overcoming regulatory burdens, or gaining access to adequate credit. These challenges are even more pronounced for minorities, whose homeownership rates remain substantially below those of their fellow Americans.”
Minorities and Women
As recent U.S. Census Bureau data affirms, the 63.6 percent homeownership rate in the first quarter of 2017 was not statistically different from the 63.5 percent rate in the first quarter of 2016 or the 63.7 percent rate in last year’s fourth quarter. Mortgage rejection is one contributor to the homeownership rate disparity of Black (41.3 percent) and Hispanic (47 percent) households in comparison with white households (71.9 percent).
Poverty also plays a role; for Black alone and Hispanic origin households, poverty levels reach 26.4 and 27.4 percent, respectively, according to the U.S. Census Bureau. Female householders without a husband present have a similarly difficult path with a poverty level of 36.6 percent.
The poverty and homeownership obstacles in the U.S. are so burdensome that there are Americans who do not envision turning their dreams into a reality. For some people, the idea of owning a home is never a conceivable possibility. There is a big difference between knowing the path to homeownership will be difficult and being so disadvantaged that you don’t even consider it possible. We must increase economic opportunities, resources and support systems to help change American lives.
Mortgages and Applications
According to Pew Research Center analysis of Home Mortgage Disclosure Act (HMDA) data, in 2015, 19.2 percent of Hispanic applicants and 27.4 percent of black applicants were denied mortgages, compared to 11 percent of white and Asian applicants. For Black applicants, credit history is the number one cited reason for mortgage rejections; for the three other groups, debt-to-income ratio was the foremost explanation.
In addition to these mortgage difficulties, an emerging trend is a significantly smaller and less diverse mortgage applicant pool. Pew reports that in 2005, about 10 percent of conventional mortgage applications were from Black households, and 14 percent came from Hispanic households. In 2015, less than 4 percent of these applications came from Black households, and fewer than 7 percent were from Hispanic households.
As we continue to recover from the Great Recession, it is important for all Americans to have access to homeownership tools. These tools, such as banking relationships and higher wages, can lead to improved mortgage approval rates, allowing millions to create better lives for themselves and their families.