June is National Homeownership Month, a time to reflect on the tools and policies needed to help more Americans get on the path to safe and affordable homeownership. Homeownership has long been the leading source of household wealth in the US, especially for lower-income Americans. But the most recent housing crash has caused many people to reconsider whether homeownership is a good tool for financial security.
- More than six in 10 Americans are homeowners. Today, 63% of American households own their homes, down from a peak of 69% in 2004.
- Homeownership helps families build wealth, in part, because it is a forced-savings mechanism. When homeowners make their mortgage payments, they are locking wealth away into their homes without having to think about it.
- Home prices tend to go up over time, which also contributes to wealth gains. The gains are usually fairly modest, though, and homes do sometimes lose value, as well.
- Lower-income Americans and households of color are less likely to be homeowners. Households with the highest income quintile are 2.2 times more likely to own their homes than the lowest income quintile. More than 70% of white households own homes, compared to less than 45% of households of color.
- Credit standards have been especially tight since the housing crisis, making it harder to qualify for home loans. The Urban Institute estimates that the tight credit standards in recent years have resulted in 5.2 million fewer mortgages between 2009 and 2014.
- Homebuyers of color face discrimination in the housing market. Real estate agents show and tell prospective black and Asian homebuyers about fewer homes than comparable white homebuyers. Black and Latino mortgage applicants are much more likely than white applicants to have their applications denied and are more likely to be offered a subprime loan.
- Homebuyers of color are less likely to get family assistance to purchase their first homes. Due in part to inheritances and gifts from family, white households buy homes on average eight years earlier than black households, allowing them to start building equity sooner.
- Homeownership tends to pay off more for white homeowners than for those of color. For every $1 in wealth that accrues to the median black or Latino household from homeownership, median white households accrue $1.34 and $1.54, respectively.
So, is homeownership good for low- and moderate-income Americans? The answer is complicated. Homeownership is not a silver bullet for wealth inequality. However, many more families could benefit from the chance to own their homes if we could expand access to the tools and resources that can make homeownership safer and more affordable.