Since 2006, 2021 was the best year for the real estate market in the last 15 years. Home purchases surged over the past year in an abnormal way. Even though home prices hit record highs eroding affordability, the housing market outperformed. The main driver of this booming housing market was record-low mortgage rates, as the interest rate on a mortgage has a direct impact on the size of a mortgage payment. Higher rates increase mortgage payments while higher rates typically reduce the amount of money that people can borrow. Thus, millions of people rushed to benefit from these low rates pushing up activity in the real estate market. Furthermore, pent-up demand and lifestyle shifts during the pandemic were also drivers of the housing market.
While the booming housing market contributed significantly to the recovery of the U.S. economy, research has consistently shown that homeownership is also associated with multiple economic and social benefits to individual homeowners. Homeownership has always been an important way to build wealth. According to NAR, the net worth of a homeowner was about $300,000 while that of a renter was $8,000 in 2021. The net worth of a typical homeowner is about 40 times the net worth of a renter. In addition to tangible financial benefits, homeownership brings substantial social benefits for families, communities, and the country as a whole.
Owning a home is associated with the better educational performance of children, higher participation in civic and volunteering activities, better health care outcomes, and lower crime rates in the communities.
Nevertheless, not all families have the same opportunities for homeownership, with many of them facing more constraints in their effort to achieve the American Dream. Indeed, there are sizeable differences in homeownership rates across groups, with the rate of homeownership for minority families lagging behind the national average. Given that homeownership contributes to wealth accumulation and the homeownership rate is lower in minority groups, data shows that the net worth for these groups is also lower. At $188,200, the net worth of a typical white family was nearly 8 times greater than that of a Black family ($24,100) in 2019.
Thus, this report examines the homeownership trends among each race and the challenges that they face to become homeowners. Since all real estate is local, the report also examines homeownership across race groups and locations in order to explain the current racial disparities in the housing market. Finally, using the Profile of Home Buyers and Sellers data from 2021, the report looks at the characteristics of who purchases homes, why they purchase, what they purchase, and the financial background for buyers based on race.