Lessons from the Last Recovery: How Black Homeowners Benefited from Appreciating Home Values

Because of predatory lending practices, the US mortgage crisis dealt heavy blows to Black homeowners and their neighborhoods, leading some to question the financial benefits of homeownership for Black households. One persistent concern about Black homeownership is the notion that home values may not appreciate as much in places where Black households are likely to purchase homes. To better understand the financial benefits of homeownership for Black households, this study analyzed home appreciation patterns in 15 metropolitan areas between 2012 and 2017 for Black homeowners who purchased a home in 2012 and compared those patterns to those of White, Latinx, and Asian homebuyers.

Researchers used Home Mortgage Disclosure data to examine homebuying patterns of households who purchased a house with a mortgage in 2012, the year generally considered the beginning of the national recovery in home values. Researchers then used the Federal Housing Finance Agency’s census-tract-level Housing Price Index to estimate home appreciation patterns over a five-year period and compared how these patterns varied between Black homebuyers and their White, Latinx, and Asian counterparts. To examine the trends of Black homebuyers more closely, researchers chose to analyze 15 metropolitan areas where the house price index accounted for more than 85 percent of the Black home purchase loans made in 2012. The 15 metro areas—Atlanta, Birmingham, Boston, Cincinnati, Columbus, Indianapolis, Los Angeles, Louisville, Minneapolis, Nashville, Raleigh, Richmond, Riverside, Sacramento, and Saint Louis—represent a diverse set of demographics, housing-cost levels, and housing market trajectories. Using these 15 metro areas, researchers conducted a multivariate analysis to understand the neighborhood and household-level factors associated with high, medium, or low levels of home price appreciation. The study found that when the market recovered from the subprime crisis, too few Black buyers were able to purchase homes, but those who did gained substantial wealth during the recovery. The study reveals that higher homebuying rates could have brought Black buyers billions in additional wealth during the recovery period.

Key findings

• Black homebuyers in 2012 are estimated to have purchased less than half the number of homes than they did in a “normal” homebuying market, such as in 2001. Tight mortgage markets and various harms caused by the crisis pushed Black homebuying rates far below average, longer-term levels.
• The median five-year estimated appreciation for Black households who did buy a home in 2012 was 38.2 percent across the 15 metro areas, substantially higher than the 29.9 percent median for White buyers.
• Almost 75 percent of homes purchased by Black households appreciated more than 20 percent from 2012 to 2017, and almost 48 percent appreciated more than 40 percent during this period. Only 3.2 percent gained 5 percent or less in value or lost value over this period.
• In total, the estimated five-year gains for the roughly 26,000 Black homebuyers who purchased a home across the 15 metro areas in 2012 amounts to more than $1.7 billion, assuming each household owned their home for at least five years. This corresponds to an average of about $65,000 in real wealth gain per household.
• In metro areas experiencing strong appreciation, all ethnoracial groups saw five-year median appreciation rates of more than 40 percent. Latinx homebuyers saw particularly strong appreciation (a median rate of 63.7 percent over five years) because they were disproportionately located in high-appreciation metro areas, such as Los Angeles and Riverside, California.
• In medium- and especially high–appreciation metro areas, homes purchased in lower-income neighborhoods and more racially diverse neighborhoods experienced greater levels of appreciation than those purchased in predominantly White and higher-income neighborhoods.
• In low-appreciation metro areas, there was no statistical difference in appreciation rates associated with racial composition, except for majority Latinx neighborhoods, which were associated with slightly lower appreciation rates.

Policy implications

To leverage homeownership as an effective wealth-building tool for Black households, the authors suggest the following:

• Federal policymakers should maintain the policies developed after the subprime crisis that ensure responsible lending practices, including strong consumer protections, robust mortgage regulations, and the availability of affordable Federal Housing Administration loans; limit risk-based loan pricing; and bolster fair-housing and community-reinvestment policy and enforcement.
• State and local policymakers should provide carefully designed down payment assistance programs aimed at moderate-income homebuyers; support local or national community development financial institutions that can provide affordable home financing in the area; pay attention to metro-level market trends, especially in shrinking and declining markets, and consider the possibility of stagnating home values when promoting homeownership; and factor the housing market cycle into underwriting, especially moderating payment-to-income ratios when the market may be reaching the top of a cycle to reduce the risk of default.

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