Are you middle-class? One way to know this for sure is through homeownership.
Unfortunately, for many Blacks, the American Dream of homeownership is quickly fading. Among racial demographic groups, European Americans have the highest homeownership rate, while African Americans have the lowest. After peaking at 50 percent in 2006, the African-American homeownership rate has fallen to 44.8 percent. By comparison, the homeownership rate for Whites is 74.1 percent, and the national rate currently stands at 66.4 percent.
Right now, the outlook for Black homeownership isn’t good. Over the long run, it’s downright scary. The Center for Responsible Lending calculates that about 11 percent of African-American homeowners are in some stage of foreclosure, and that by the end of 2012, 1.1 million Black families will lose their homes.
It’s the same old story when it comes to class, race and wealth. The median wealth of White households is 20 times that of Black households. And Pew Research analysis indicates that when the housing market bubble burst in 2006 and the recession followed in late 2007 to mid-2009, it took a far greater toll on the wealth of minorities than Whites. From 2005 to 2009, inflation-adjusted median wealth fell by 53 percent among Black households, compared with just 16 percent among Whites. As a result of these declines, the typical Black household had just $5,677 in wealth [assets minus debts] in 2009 and the typical White household had $113,149.
Sadly, the alarmingly low number of Black homeowners is likely to dip further. You may want to pull your Congressional representatives’ coat regarding your concerns about legislation called, the Qualified Residential Mortgage Rule or QRM, that can make it tougher to get loans by requiring all prospective homeowners to put at least 20 percent down when purchasing a property. The new requirement could make homeownership as we know it a thing of the past. The higher down payments could exclude 75 percent of African Americans from obtaining a fairly priced mortgage. Trade groups that oppose QRM say it would take 14 years for the typical American family to save enough money to amass a 20 percent down payment.
A series of ongoing challenges from the banking industry continues to erode Black homeownership. As the collapse of the housing market lingers, African Americans are being disproportionately impacted by bank lending practices, including stricter credit score requirements, a severe decline in loans made to Blacks, and predatory lending that has made it difficult for Black homeowners with costly subprime loans to swap out of those mortgages and exchange them for more affordable home loans.
The sky hasn’t fallen yet, but a recent Pew Research Center analysis found that after years of prosperity, homeownership rates among Black Americans have plummeted to their lowest levels in 16 years. Unemployment has reached levels not seen since the 1980s. And, current and prospective African-American homeowners are being hurt by high levels of unemployment. The jobless rate for Blacks now tops 16 percent nationwide. It’s obviously tough to buy or refinance a home – much less save it from foreclosure – if you don’t have a steady paycheck.
Two African American titans in real estate have survived the recent real estate downturns in grand style. The grandson of a hotel doorman, Don Peebles is worth $350 million and runs one of the country’s largest minority-owned real estate development companies. Peebles Corporation’s portfolio includes hotels, apartments and office space in Miami Beach and Washington, D.C. In 1979 Peebles became a real estate agent in the District of Columbia. Today he owns 13 acres of prime Las Vegas land.
Quintin E. Primo III is a minister’s son that grew up in Chicago. He earned his MBA at Harvard in 1979 and took a job in Citicorp’s real estate lending division. Primo founded Capri Capital in 1992 and achieved initial success extending mezzanine loans to small borrowers that larger firms neglected to serve. Today, Primo is worth $300 million and Capri’s portfolio is loaded with apartment complexes. The firm’s assets under management are $4.3 billion.
William Reed is head of the Business Exchange Network and available for speaking/seminar projects through the Bailey Group.org.