“A strong market broadly benefits homeowners.” — Redfin CEO Glenn Kelman
Neighborhoods predominantly populated by minority families are substantially growing in home equity — a trend that’s now reaching into its sixth year. Predominantly minority neighborhoods posted large percentage gains each year from 2012 to 2018, according to a new Redfin study.
The gains were, in fact, larger than mostly non-minority neighborhoods during the same periods. Analysts noted, however, that in real-dollar amounts, the non-minority neighborhoods still posted larger gains.
“The home equity gap between white and minority communities grew to $94,000 in 2018,” they said. Because the current housing uptrend is unlike previous housing booms wherein homeowners tended to regularly cash out their equity, “these price gains led to real increases in wealth,” said Redfin CEO Glenn Kelman.
“On an absolute-dollar basis, homeowners in minority communities became wealthier but still fell further behind,” Kelman added.
What Does This Mean for Homeowners?
Overall, this information is good news for all homeowners.
“A strong market broadly benefits homeowners,” Kelman said.
Since non-minority neighborhoods tended to have more equity in dollar amounts than minority neighborhoods at the nadir of the housing crash, those neighborhoods started at a higher point in the equity comparison. As a result, those neighborhoods gained relatively more equity as the housing market recovered.
“It’s still very hard for people starting with less money to catch up,” Kelman concluded.
How Redfin Defined “Minority” Neighborhood
The analysis was based on home values in ZIP codes from the 16 most-populous metro areas tracked in Redfin’s historical home-sale price database, according to Redfin’s methodology for the study.
ZIP codes were considered “white” and therefore non-minority if fewer than one in every four households was not white as of 2016 Census data. Minority communities were defined as half or more of households reporting as African American, non-white Hispanic or Asian. The study also allowed for “mixed-race” communities which are communities in which somewhere between a quarter and half of the population of households are not white, according to Redfin.
The results do not include households in these communities where the occupants are renting instead of owners.