Jones, 48, planned to build fairness by buying a home in the neighborhood of South Phoenix where she grew up. Instead, she is her bystander, facing soaring rents and struggling to resume the process of finding her place.
“It was very defeated and very disappointed,” Jones said. “That’s the American dream. When I buy a house, I feel like I’ve achieved it.”
While the market is pricing first-time homebuyers of all backgrounds, black buyers are facing even greater barriers.
According to a Zillow analysis of mortgage disclosure law data, black applicants were denied mortgages at a much higher rate than other groups. In 2020, nearly 20% of black applicants were denied mortgages, compared to 10% of white applicants. Credit history was the most common reason black applicants were rejected.
However, several programs are currently underway to help Jones and other future buyers not be able to afford a home.
It creates a huge hurdle in the hottest housing market today. There, investors offering cash are buying more real estate than ever to rent or turn around. Investors bought a record 18.4% of US homes purchased in the fourth quarter of 2021, up from 12.6% a year ago, according to a Redfin analysis of county records.
In Phoenix, investors are particularly active, buying 28.4% of their properties in the same time frame.
Jones spent almost a year trying to buy her first home there. She started saving money and she was approved for an FHA loan that required only 3.5% down. However, with less than $ 6,000 reserved for her down payment, Jones couldn’t compete and eventually stopped her search.
“Every time I made an offer, every time I went to see something, I was either overpriced or someone had already grabbed it,” Jones said. “I can’t afford what’s there right now, so I just put it in the back burner.”
Jones realtor Maisha Fair says many of Phoenix’s clients are facing the same predicament.
“They can’t buy anymore. They’re stuck in the rental market,” Fair said. “And it hurt the people who live here.”
Some experts expect these market conditions to widen the racial homeownership gap.
Nearly 45% of black families own a home, compared to 74% of white families, according to census data. The gap has changed little since the 1960s, when the Civil Rights Act outlawed housing discrimination.
“Unfortunately, the gap between homeowners is actually widening,” said Jessica Lautz, vice president of demographics and behavioral insights at the National Association of Real Estate Agents. “The pandemic has made everything worse. Looking at the inequality in home ownership, we can see that black homebuyers have had a hard time entering the homebuying market because of the pandemic.”
“The inequality in homes will exacerbate the inequality in wealth,” said Andre Perry, a senior researcher at the Brookings Institution. “When people don’t buy a home, it makes it difficult for future generations to buy a home … when we ignore wealth, we are essentially many, even high people. Fill your head with discrimination and barriers that hinder people’s income from buying a home. ”
Soaring rents can further widen racial wealth inequality and drive more people out.
US rents hit a record high in April and are expected to continue to rise. Median rent across the country was $ 1,827 per month, up 16.7% from a year ago, according to a Realtor.com report.
“The market is definitely accelerating gentrification,” Perry said. “What that really means is that people are driven into low-wealth, low-resource suburbs. People are far from their jobs and families will struggle.
In Phoenix, real estate agent Maisha Fair states that investors are not only buying real estate, but also soaring rents, forcing families to move.
“They can no longer live in a neighborhood where they know their neighbors,” Fair said. “The same investors who buy these homes in cash are renting them to the same people who wanted to buy them,” Fair said.
Jones’ rent in Phoenix has risen $ 400 a month. She ran out of the $ 6,000 she had set aside for her down payment after losing her job for several months. Now she is far more focused on achieving her goals than fulfilling her dream of owning a home.
“It’s all money … I can’t even afford to live there,” Jones said. “Oh yeah, that’s sad.”