01 Nov 2012 Now or Never for Black Homeownership, by B.B. Robinson, Ph.D.
Homeownership rates have declined in America since the start of the economic crisis in 2008.
Nowhere has the homeownership decline been more acute than in the black community. In 2004, 49.1 percent of black households owned their own home. In 2011, that number fell sharply to 44.9 percent.
This may be a now or never last opportunity for many blacks to be able to buy a house and realize the American Dream.
For a myriad of reasons, the homeownership rate for black Americans should not be expected to rise anytime soon — if ever. There are several reasons supporting this hypothesis:
* Housing prices have probably bottomed out. With the costs of homes beginning to rise, this will soon begin to place more and more properties beyond the financial reach of many black Americans.
* When the Federal Reserve Board discontinues measures that have held interest rates artificially low — which the Board plans to do in late 2014 — interest rates will inevitably rise. This will also likely price many black Americans out of the housing market.
* Following the housing bubble that precipitated the economic downturn, requirements for mortgage loan programs were strengthened. Generally, higher down payments and lower debt-to-income ratios are required. This may increase the difficulty now for some blacks to qualify for mortgage loans.
* Given that many types of moderate-wage manufacturing jobs lost during the most recent economic downturn are not expected to reappear, blacks who held those jobs may only be able to find employment in lower-wage jobs. With housing prices on the rise, this will prevent them from qualifying for home mortgages or even consider some homes.
* College-educated blacks, who traditionally were able to qualify for home loans in the past, may soon find that college tuition — which continues to rise — and increasing college loan debt will become an expense preventing them from qualifying for a home loan.
* Increases in the population and the related “demand-pull” inflation could drive up the cost of land. This will add to the cost of new homes, the tax rates of existing homes and become another factor pushing the overall prices of homes beyond the reach of more black Americans.
* New and increased concerns about natural disasters such as floods and earthquakes may cause building codes to be strengthened by governments and add to construction costs. These new regulatory burdens, plus new energy-saving mandates and the increasing cost of energy in general, can increase the cost of homeownership to rise to a point where some black Americans out of the housing market.
These are among just a few of the more obvious reasons why home affordability and homeownership rates could decline for black Americans in the near future.
Given that homeownership is a tried and true tool for building wealth, the unfortunate turn of events described herein portends that the black community can also expect to become less wealthy over time.
Hence this gloomy future suggests that this may be a now or never moment that will have a huge impact on generations of black Americans to come.
Black Americans who are sitting on the fence — wondering whether now is a good time to purchase a home — should decide in the affirmative.
If they can afford it, black Americans should take the plunge now. Otherwise, assuming that this analysis of the economy is correct, black Americans may find there will be fewer opportunities to become a homeowner and amass wealth in the future.
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B.B. Robinson, Ph.D., is a member of the national advisory council of the black leadership network Project 21. You can visit his website at www.blackeconomics.org. Comments may be sent to [email protected].
Published by the National Center for Public Policy Research. Reprints permitted provided source is credited. New Visions Commentaries reflect the views of their author, and not necessarily those of Project 21, other Project 21 members, or the National Center for Public Policy Research, its board or staff.