Mortgage readiness gap between Black and white renters sees big decrease

But large disparities in homeownership, loan denial rate remain

According to a new report from Zillow, the gap between the share of Black families who can comfortably afford a mortgage payment and the share of white families who can do so saw a substantial contraction during the COVID-19 pandemic.

Zillow’s study estimated that, in 2022, more than 6.3 million families across the United States were “income mortgage-ready” — that is, the typical mortgage payment in their area wouldn’t exceed 30% of their income. About 7.8% of Black non-homeowner families were mortgage-ready in 2022, compared to 12.5% of white families. That’s a gap of 4.7 percentage points, down from 7.9 percentage points in 2012.

Part of that narrowing came because the median family income of Black renters has risen more than it has for white renters since 2012. Unsurprisingly, areas where Black family incomes rose the most generally saw a larger dip in the racial mortgage readiness gap over that same time period.

But while that particular gap has narrowed, a large gulf remains in the national homeownership rate of Black households (44% in 2022) and white households (73%). In large cities, that gap is often larger —over 30 percentage points in more than half of the United States’ 50 largest metro areas in 2022. Part of that is due to credit and lending issues: the mortgage denial rate of Black applicants in 2022 was 146% higher than that of white applicants, with credit history cited as the most common reason for denials, according to Zillow.

“Despite the significant decline in mortgage affordability in the past two years, millions of families who do not own their home have the means to afford the largest share of a homeowner’s cost — the mortgage,” said Orphe Divounguy, senior economist at Zillow.

“While some families may choose to rent, many are simply constrained. It’s crucial to recognize the existence of additional barriers beyond monthly cost, including access to funds for a downpayment and closing costs — as well as other barriers that significantly contribute to mortgage denials, like insufficient credit scores and lack of access to credit. These barriers especially impact people of color.”


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