Homeowners starting with less money still have it harder to catch up in the recovery
Home equity increased substantially for homeowners in white, minority, and mixed-race neighborhoods from 2012 to 2018, but this has not prevented the wider home-equity gap between these communities, according to a new report by Redfin.
Minority communities posted an average equity gain of 265%, representing $185,000 in gains in absolute dollars. Average homes had $254,000 in equity in 2018, compared with $69,000 in 2012. Home in mixed-race communities followed with an average gain in equity of 199%. Average home equity increased $207,000 to $311,000 in 2018 from $104,000 in 2012.
Equity in white neighborhoods only increased by 171%. But given their 2012 average equity of $127,000, white communities posted the biggest dollar gain in equity of $221,000 to reach $348,000 in 2018.
In spite of the broad increases, the home-equity gap between white and minority communities widened in 2018 to $94,000 from only $58,000 in 2012.
"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," Redfin CEO Glenn Kelman said. "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."
