Despite Home-Equity Uptick, Black American Median Home Values Lag Behind

Despite promising data showing substantial gains in home equity, Black Americans still lag well behind other demographic cohorts, according to a new report from Redfin, Seattle.

The analysis found people who bought homes in primarily Black neighborhoods in 2019 gained a median $59,000 in home equity in 2020, compared with $50,000 for people who bought homes in primarily white neighborhoods. Equity grew more for people who bought homes in primarily Asian and Hispanic neighborhoods—by $79,000 and $67,000, respectively.

While Black homeowners gained more wealth through home equity than white homeowners last year, the trend is a reversal from the previous decade, when homeowners of color saw their home values and home equity recover more slowly from the Great Recession.

However, people who bought homes in primarily Black neighborhoods in 2019 currently have a median of $89,000 in home equity, the smallest amount of the four races included in this analysis. That’s compared to $257,000 for Asian homeowners, $113,000 for white homeowners and $102,000 for Hispanic homeowners.

The report found Black homeowners started with much lower equity—a median of $30,000 in 2019—than their Asian ($178,000) and white ($63,000) counterparts, and slightly less than the typical Hispanic homeowner ($35,000). The difference in equity in 2019 was primarily driven by a key factor: Black homebuyers made smaller down payments than buyers of other races, due to lower home prices and putting down a smaller percentage of the sale price.

Redfin Chief Economist Daryl Fairweather noted even though Black homeowners still have less equity than white homeowners, the home-equity gap between Black and white Americans is narrowing. That’s largely because significant gains in home values, which increase equity above initial down payments, fueled equity gains from 2019 to January 2021 for homeowners of all races. The typical homeowner in a primarily white neighborhood had $33,000 more home equity than the typical homeowner in a primarily Black neighborhood in 2019, a gap that had shrunk to $24,000 by January 2021.

Additionally, the report said homeowners in Black neighborhoods experienced a nearly 200% home-equity increase in 2020, a huge increase that’s mostly due to low equity pre-pandemic. Black homeowners nationwide who bought their homes in 2019 saw a 197% increase in home equity last year, a bigger percentage increase than the other races. Home equity increased 191% for Hispanic homeowners, 79% for white homeowners and 44% for Asian homeowners. Black homeowners starting out with lower equity than the other races is a key reason for the larger percentage jump.

“Black homeowners benefited from 2020’s hot housing market, and the trend is continuing into this year as Americans remain intensely interested in relocating and buying homes and home values continue to rise,” Fairweather said. “But less than half of Black Americans own the home they live in, so most of the Black community didn’t benefit from the enormous wealth homeowners have gained in the past year. Especially compared with the three-quarters of white Americans who own their homes, the total benefit for Black families across the country is relatively small. With higher unemployment rates and less overall wealth, Black families were not as likely as white families to buy homes even when prices were comparatively low.”

The homeownership rate for Black families was 44.1% in the fourth quarter, the most recent period for which data is available. That’s steady from 44% a year ago, but it had been on the rise before the pandemic, with a jump up from the 42.9% rate in fourth quarter 2018. The current homeownership rate for white families is significantly higher than it is for Black families: 74.5% in the fourth quarter, up slightly from 73.7% a year earlier. The homeownership rate for Asian families increased from 57.6% to 59.5% over the same time period, and it went from 48.1% to 49.1% for Hispanic families.

The report said Black homeowners in Chicago, Newark and Washington, D.C. have seen “enormous” home-equity gains, mostly because equity was so low pre-pandemic. People who bought homes in primarily Black neighborhoods in Chicago in 2019 experienced the biggest percentage equity gain of the metro areas included in this analysis, with a 750% increase from 2019 to January 2021. The increase is so big partly because median home equity was just $8,000 in 2019, compared to $68,000 in January 2021. Newark and Washington, D.C., saw increases of 626% and 425%, respectively. Median home equity went from $19,000 to $138,000 in Newark, and $16,000 to $84,000 in Washington, D.C.