Black buyers being squeezed out of hot housing market – CBS Baltimore

(CNN) — Nicosha Jones spent almost a year buying her first house.

Jones, 48, planned to build equity by buying a home in the South Phoenix neighborhood where she grew up. Instead, she’s on the sidelines, facing skyrocketing rents and struggling to restart the process of finding her own apartment.

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“It was very devastating, very discouraging,” Jones said. “It’s the American dream. Once you’ve bought a home, you feel like you’ve nailed it.”

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

The market is pricing up first-time home buyers from all backgrounds, but black buyers face even greater obstacles.

Studies show that black homebuyers are less likely to be from wealthy families, are more likely to be in debt, and pay disproportionately higher rents, making it harder to save for a down payment.

Black applicants were denied home loans at a much higher percentage than other groups, according to a Zillow analysis of data from the Home Mortgage Disclosure Act. Almost 20% of black applicants were denied a mortgage in 2020, compared to 10% of white applicants. Credit was the most common reason given to black applicants for rejection.

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 ease the housing shortage five years from now.

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

That creates a major hurdle in the currently hot housing market, where investors with cash offers are buying more properties to rent or sell than ever before. According to a Redfin analysis by County Records, investors bought a record 18.4% of U.S. homes purchased during the final quarter of 2021, up from 12.6% a year earlier.

Investors are particularly active in Phoenix and have acquired 28.4% of the properties in the same period.

Jones spent nearly a year buying her first home there. She had started saving money and was approved for an FHA loan that would only pay 3.5% less. But with less than $6,000 for a deposit, Jones couldn’t compete and eventually gave up the search.

“Every time I made an offer, every time I looked at something, I was outbid or someone had already gotten it,” Jones said. “I just put it on hold because I can’t afford what’s out there right now.”

Maisha Fair, Jones’ broker, says many of her Phoenix clients face the same predicament.

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“You 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 will widen the racial homeownership gap.

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

“Unfortunately, the homeownership gap has actually widened,” said Jessica Lautz, vice president of demographics and behavioral science at the National Association of Realtors. “The pandemic has exacerbated everything. When we look at homeownership inequality, we see that black homebuyers are finding it harder to enter the home market because they have been hit harder by the pandemic.”

Owning property is the primary vehicle for families to build wealth and it has never been more valuable. According to the Hamilton Project, an economic policy initiative of the Brookings Institution, in 2019 the average white household had 7.8 times more wealth than the typical black household.

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

Soaring rent costs can widen the racial wealth gap and displace more people.

Rents in the US reached a new record high in April and are likely to continue to rise. According to a Realtor.com report, the national median rent was $1,827 per month, up 16.7% year over year.

“The market is definitely accelerating gentrification,” Perry said. “What this really means is that people are being pushed into suburbs with low levels of wealth and resources. That people will be farther from their jobs and families will struggle.

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

“They can no longer live in a neighborhood where they know their neighbors,” Fair said. “The same investors who came in and bought these houses for cash are now renting to the same people who were going 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’s much more focused on making ends meet than realizing her dream of owning a home.

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

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