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The dangers of housing while black

Updated: Sep 20, 2018

​ “Blacks who purchased their first homes between 2000 and 2010 would have been wise to hold on to their money instead” John Hopkins University

Reading that statement on the surface you would assume that, they must be mistaken. Owning a home is the gateway to personal wealth right? According to a study conducted by John Hopkins University that would be a big fat no! In fact, the study reports that blacks were much more likely than whites to experience major declines in their overall net worth -- regardless of whether they bought their homes before or during the Great Recession.

Think of it like this, blacks who bought their first home between 2003 and 205 saw a reduction in their net worth of 23%. On the flip side, the net worth of white first time home buyers jumped as much as 50%

Let’s do some quick math. Net worth is defined as the value of assets. Assets that include retirement, investments, earnings and of course a home. Then you take all of that minus the debt against those assets and you have your net worth or a measurement of your wealth. Median wealth for white households is around $134,000 compared to blacks roughly at $11,000. Yes, $11,000. It is not just a housing thing, blacks usually earn less and have fewer investments than whites. This is why housing is so connected to the wealth of blacks. This is why the value of a home can make a break a family’s financial growth.

The reasons why blacks lost wealth at higher rates is because their homes did not appreciate in value as much as those owned by whites, particularly if those homes are in communities that experienced high rates of foreclosures and declining rates of home ownership. we could also say, those areas that were redlined.

For a local perspective, think Varina versus Short Pump. Both areas were hit by the housing crisis, yet homes in Varina lost up to 10 percent of their value due to foreclosure while homes in Short Pump stayed level. In fact, homes in Varina are just now reaching the value they had 8 years ago.

This is why the first quote may be hard to hear but true. The net loss in net worth was so devastating for blacks, some families would have actually fared better if they never bought a home at all.

So why does 2005 mean so much for today? Simple, take a look at Petersburg. Many homes in the community that were once owned by families are now owned by investors. There are entire streets owned by investors. Look at Church Hill, Ginter Park and Northside. Investors are buying the homes once owned by people of color.

Families who had limited income qualified for mortgages they shouldn't have been able to. Today those same families have limited income, greater debt and bad credit. As the housing market improves so does the growth in wealth. If you lost your asset and your only asset was a home, you are missing out on the growth. This widens the income gap even more.

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