“Homeownership among African Americans has declined to levels not seen since before passage of the Fair Housing Act of 1968” is the way a recent Forbes article begins where it speaks to how the long term ramifications of not owning a home can substantially impact one’s ability to accumulate wealth. As an African American man in the real estate industry I’ve been given a unique perspective as to why this may be the case and what can be done to hopefully reverse the trend.
It wasn’t all that long ago that I was in a very similar position as many of my black peers. I was on welfare, renting a small apartment with my wife and kids, and trying to figure out how we could escape our reality which seemed like an ongoing nightmare. Contrary to what some people believe we didn’t choose that life. It was a life we had to accept at the time in order to survive. But my only hope was that I would be able to do all I could to help pull our family out of the hole we were in that had claimed the lives of so many people who grew up under similar circumstances.
Some years later my wife and I purchased our first home. I became a real estate agent for a major company in Raleigh then left and started my own real estate and media company. Since then we’ve done all we could never to see that life again. But the truth of the matter is you never forget that life and those thoughts and emotions often times haunt you.
This is what a number of black people experience every single day. When a reality has been presented for so long it becomes difficult to see beyond it. And many African Americans who do try and achieve a better life it does not come without struggle and the risk of losing it all and going back to the nightmare they’ve known.
There has been numerous articles written about the decline in black homeownership where authors and researches have mentioned how the subprime loans scandal that took place prior to the Great Recession was a main contributor to the Black family’s decline in homeownership but I would like to address the matter from a closer point of view.
Student Loan Debt
Many first time home buyers are Millennials between the ages of 25 and 32. We’ve found that regardless of race most Millennials are saddled with student loan debt. And in order for them to meet their debt to income ratio requirements they need to bring a decent sized down payment to qualify. For the large majority of non-black clients they were fortunate to receive those funds from family members. However, for many of our black clients they would only be able to obtain enough for a down payment through either the money they’ve saved and/or a down payment assistance program which can raise their interest rate and sometimes put them over the debt to income ratio limits. The lack of generational wealth in the black family plays a role in the decline of black homeownership.
Credit Card Debt
It’s true that many Americans can be irresponsible when it comes to credit card use. But have you ever met someone who lived off of one? I can remember going to school full-time, working part-time, collecting welfare services and still not having enough to make ends meet. So we did what we felt we must do which was put it on a credit card with no real plan on how we’ll be able to pay it back. I’ve seen a similar story play out in the lives of some of our clients where they’ve been working, keeping up with their payments but not paying any of them down, just staying afloat. As a result, when they seek to get approved for a mortgage the numbers can come in too close. This too also contributes to the decline of black homeownership.
Sometimes it’s not the debt that keeps a person from owning a home. It’s the fact they don’t make enough money. As the price of homes continues to climb rental rates go up along with it. So one cannot dismiss the reality that rather someone is buying or renting there’s going to be a price to pay. For our clients who worked in the tech and sales industries they were in a far better position to buy than customers who worked in government or retail (although there are exceptions). The more you’re able to make and the less people you owe the better the outcome. The lack of cash flow has contributed to the decline of black homeownership.
Reversing the Trend
How does one reverse this trend? How do you go from having nothing to something? It starts with securing the best possible means of employment then working to pay down debts that you owe. There has been reports of Wells Fargo committing $60 billion to create at least 250,000 new African American homeowners but buyers must beware of these sorts of initiatives. Having worked in real estate for almost a decade I can attest that there is rarely something given with no strings attached. When programs are created for a particular group there’s usually something in place where there is a hike in the interest rate, a private mortgage insurance installment, or some clause that tells the buyer they would have to pay back a certain amount if they sell the home within a certain amount of years and they obtained a loan that has special conditions. The best way is to, again, do all you can to find better employment, pay down your debts, and save some cash. It’s not easy, it’s not fun, and may take a while but it can be done. And it can be done by you!
By Steven Gunter, Founder of Urhous