Since 2012, Broad Home-Equity Gains Across Minority and White Neighborhoods
Minority Neighborhoods Had the Largest Percentage Gains in Home Equity
But Starting with More Equity, White Neighborhoods Had the Largest Absolute-Dollar Gains
Homeowners in white, minority and mixed-race neighborhoods posted substantial gains in home equity from 2012 to 2018. Minority neighborhoods started with the lowest levels of home equity but had the largest percentage gains. White neighborhoods had the lowest percentage gains in home equity, but the largest gains in absolute dollars. Meanwhile, the home-equity gap between white and minority communities widened to $94,000 in 2018.
Average Home Equity and Equity Gains, 2012 – 2018
|Average Home Equity in 2012||Average Home Equity in 2018||Dollar Gain in Equity||Percentage Gain in Equity|
“Home prices over the last six years rose most steeply in minority communities, and unlike in past booms when Americans just borrowed more and more money, these price gains led to real increases in wealth for homeowners of color,” said Redfin CEO Glenn Kelman. “But even though homeowners in mostly minority communities had the largest percentage gains in home equity, it was the folks living in mostly white neighborhoods who had the largest dollar gains, just because they had so much more home equity at the beginning of the recovery. This just goes to show that, even as a strong market broadly benefits homeowners, it’s still very hard for people starting with less money ever to catch up. On an absolute-dollar basis, homeowners in minority communities became wealthier, but still fell further behind.”
Our analysis is based on data on home values in white, minority, and mixed-race zip codes in the 16 most populous metropolitan areas for which Redfin tracks historical home-sale price data. To measure home equity, we used the Redfin Estimate, the automated home-value estimate with the industry’s lowest published error rate for listed homes, as well as loan information from county records. We considered a zip code “white” if less than 25 percent of its households were not white, according to Census data as of 2016. We called a zip code a “minority” community if more than 50 percent of its households were African American, non-white Hispanic or Asian. We defined a community as “mixed-race” if between 25 and 50 percent of its households were not white. It’s worth noting that the data we analyzed does not account for people who lived in but never owned homes in these communities. As home prices appreciated faster than wages, it’s likely that many people became less able to buy homes in their neighborhoods, and have thereby been excluded from the wealth gains afforded by home-equity growth in the past six years.
See the table below for local data on home equity and appreciation. Highlights include:
- Riverside, CA is the only place where minority communities posted the largest equity gains in absolute dollars, followed by mixed-race and then white neighborhoods.
- Denver’s minority zip codes were home to the biggest percentage increase in home equity among all the groups of communities in the study, up 452 percent.
- All but three of the 16 metros saw the equity gap between white and minority communities widen. Riverside and Miami saw this gap narrow; in Boston, the gap was unchanged.
Home Equity and Home-Equity Growth Among Minority, Mixed-Race and White Zip Codes
|Minority (% Minority > 50%)||White (% Minority < 25%)||Mixed Race (% Minority between 25% and 50%)|
|Metro||Equity in 2012||Equity in 2018||Equity Growth ($)||% Equity Growth||Equity in 2012||Equity in 2018||Equity Growth ($)||% Equity Growth||Equity in 2012||Equity in 2018||Equity Growth ($)||% Equity Growth|
|Los Angeles, CA||$134,000||$448,000||$314,000||234%||$262,000||$752,000||$490,000||187%||$194,000||$577,000||$383,000||197%|
|San Diego, CA||$104,000||$365,000||$261,000||251%||$187,000||$549,000||$362,000||194%||$149,000||$427,000||$278,000||187%|
|San Francisco, CA||$162,000||$677,000||$515,000||318%||$266,000||$856,000||$590,000||222%||$199,000||$745,000||$546,000||274%|
|Lowest home equity across groups in 2012|
|Highest home equity across groups in 2018|
|Highest home equity growth in dollars across groups|
|Highest home equity percentage growth across groups|
Home equity is just one measure of wealth, but we chose to study it because it is so closely tied to the recent housing market recovery, and it has historically been Americans’ main financial asset. But a home represents much more than the wealth it creates. Where one lives determines her access to resources like high-quality education and opportunity like well-paying jobs. We at Redfin seek to use this research to better understand our role as advocates for homebuyers and sellers of all backgrounds in helping to create a more integrated, and thereby more equal society.
Yesterday Redfin hosted a symposium about race and real estate, exploring how the real estate industry can support fair access to housing for all types of people. We brought together members of the real estate community, along with Professor Elizabeth Korver-Glenn, author of ground-breaking studies on race and the real estate industry, to explore how the industry can better help all types of people buying and selling homes move to places where they’ll have the best access to schools, jobs, opportunity and wealth.
For this study, we looked at county sale records for homes purchased at anytime during 2012. After cleaning the data, we had a sample of roughly 962,000 sales. Assuming those homeowners are still living in the same house and that they all took out the prevailing 30-year fixed mortgage rate at the time of purchase, we were able to calculate the outstanding loan balance in August 2018 using the total original value of loans (first and second), the 30-yr fixed monthly average mortgage rate from Freddie Mac in the month of sale and the total number of monthly payments made thus far. We assumed that none of the homeowners paid down their mortgage and that none borrowed against their home equity. The August 2018 Redfin Estimate was used as a proxy for the current market value of these homes. Home equity in 2018 is then obtained by subtracting the outstanding mortgage balance from the current market value of the home. Home equity in 2012 is simply the difference between the purchase value of the home and the original loan balance. We classified a zip code as minority, mixed or white based on the shares of white and non-white households over the five year period including 2012 through 2016, according to household race data from the 5-year American Community Survey. Since the sale records are linked to zip codes, we are able to track home equity changes in minority, white and mixed-race zip codes, as defined above. Of the roughly 2,300 zip codes, minority and white each made up 36 percent, while the remaining 28 percent were considered mixed-race.
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