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'Double trouble' presents extra challenge for minority home buyers

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Posted at 8:30 AM, Feb 13, 2022

CLEVELAND, Ohio — A phenomenon realtors have labeled as “double trouble” is putting pressure on home buyers, particularly people of color. In the several years since the COVID-19 pandemic began, the U.S. housing market has been simultaneously marked by record-high home prices and record-low inventory.

“It took off in a way, even people who had been in the business awhile, I don’t think we really prepared for how it happened to that extent,” said Lionel Lewis, a real estate broker with Cleveland-based New Era Real Estate Group.

Lewis was welcoming a client to her new home Saturday in Cleveland. Ashya Majied, a first-time homeowner, estimated she toured 40-50 homes throughout her housing search. She made a winning offer on what would become her home the same day it hit the market.

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A home recently purchased in Cleveland

“It was like the highest offer I had made on a house, but I thought it was worth it. And there were 18 other offers in one day,” she said.

According to the National Association of Realtors (NAR) and Realtor.com, home prices have soared by 30% in the past several years. At the same time, there is 57% less inventory now than in 2019. The compounding challenges have narrowed the available selection of affordable homes for sale and further widened the homeownership gap between white Americans and Americans of color.

“We see a 30 percentage point difference from 72% to 42% when we look at white families versus African-American families. And that gap is larger now than it has been for over 30 years,” said Kevin Nowak, the Executive Director for CHN Housing Partners.

The nonprofit affordable housing developer and housing services provider focus on bridging the homeownership gap and making homeownership possible for low-income families. Nowak explained the disparity in homeownership is partially tied to longstanding income disparities. In Northeast Ohio, lower-income and fewer savings make it more difficult to jump from renting to owning property.

“What we're often seeing in Cleveland and Cuyahoga County is that it's actually more expensive to rent than it is to own a home,” Nowak said. “So if you as a family are paying double for [housing] by being a renter, you aren't able then to take those dollars that otherwise you would be saving and use them for your down payment.”

Additionally, policies borne out of the Great Recession, such as Dodd-Frank, have added more complexity to mortgage lending and down payment assistance.

“Since 2008, we have not seen as many mortgages going into communities of color. We haven't seen as many mortgages going to people who are buying homes under $70,000,” Nowak said. “We see that also holding back many, many African-American families in particular.

A report compiled by NAR and Realtor.com examined how the “double trouble” of the housing market is affecting housing affordability. The research looked at affordability for all income groups, as well as by race in the largest U.S. metro areas.

For households earning $75,000 to $100,000, the report found there’s one affordable listing available for every 65 households. It’s a stark decrease in availability from one affordable listing for every 24 households in 2019 for the same income group.

Akron, Ohio topped the list of metro areas with the most affordable housing for Black Americans. The research found Cleveland was also relatively affordable, with moderate-income residents able to afford roughly 77% of homes available for sale.

Nowak explained that because of mortgage hurdles, it can still be difficult for low and moderate-income families to make an initial purchase and receive aid. CHN offers low-interest loan payments, first-time homebuyer classes, and down payment assistance. You can find more information about its programs in Cleveland and Cuyahoga County by clicking here.

Real estate agents and brokers say it’s critical for homebuyers to do their research and be patient.

“Stay engaged in the process until you find what works for you,” Lewis said.

Majied said though she didn’t run into lending issues, she still recognizes the challenges of homeownership for the black community. She intentionally chose a black real estate agent after recommendations from friends and the desire to have an agent who could relate to her life experiences. She said the long, sometimes stressful, process of home buying was worth it in the end.

“I think owning a home helps create pathways for wealth. I want to be able to leave something for the next generation,” she said.

To read the entire NAR and Realtor.com report, you can click on this link.

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