Persistent disparities in homeownership rates between whites and minorities may be at least partly explained by the fact that minorities are less likely to apply for mortgages than whites and more likely to be denied, a study by Zillow and the National Urban League suggests.
The study also found many blacks and Hispanics who have managed to become homeowners live in communities that are taking the longest to recover from price drops seen after the U.S. housing bubble burst.
Zillow — which has been playing an increasingly prominent role in debates over housing policy — will host a town hall meeting with the U.S. Department of Housing and Urban Development on Wednesday, Jan. 22.
Zillow Chief Economist Stan Humphries will moderate the discussion, “Building Equality in Housing,” with HUD Secretary Shaun Donovan answering questions from mortgage applicants, homebuyers and homeowners.
Zillow’s study examined recent trends in minority access to housing using data that lenders submit to federal regulators under the provisions of the Home Mortgage Disclosure Act (HMDA). That information was supplemented by Zillow Home Value Index data and a survey performed by Ipsos.
While blacks make up 12 percent of the U.S. population, they filed 6 percent of purchase mortgage applications in 2012. Hispanics, who make up 17 percent of the population, filed 9 percent of purchase applications.
The HMDA data showed that when applying for a conventional loan, black applicants were 2.4 times more likely than white applicants to be denied, and Hispanic applicants were 1.98 times more likely to be denied.
Outcomes were not quite as skewed when minorities applied for FHA loans — black applicants were 1.75 times more likely than white applicants to be denied, and Hispanic applicants were 1.47 times more likely to be denied.
Neighborhoods with a higher proportion of minority residents were hit harder during the downturn. The study found home values in neighborhoods with a high proportion of black residents are still down by 23.3 percent from peaks, compared with 13.4 percent in neighborhoods with a high proportion of whites. Home values in largely Hispanic neighborhoods are down 32.6 percent.
Home prices in neighborhoods with a high proportion of Asian residents are down by only 0.6 percent.
While 74 percent of whites own a home, 61 percent of Asians, 51 percent of Hispanics, and 46 percent of blacks own. Those numbers could say as much about lingering societal problems as they do about mortgage lending practices.
The study noted that there’s not enough information in HMDA data or the survey conducted for the study to determine whether lenders are engaging in discriminatory practices.
“Different education levels among races, higher or lower incomes, and varying credit scores all inevitably shape the homebuying and homeownership experiences,” the study’s authors said in summarizing its findings.
Blacks and Hispanics applying for mortgages had lower incomes on average, and were more likley to have lower credit scores. Asians were more likely to have achieved a higher level of education, contributing to their higher incomes.
Income inequality also meant blacks were much more likely to put down 5 percent or less as a down payment. A majority of Hispanics contributed 6 percent or more towards a down payment. Asians are more likely to have down payments of 20 percent or higher.
Past studies have found that during the boom, blacks and Hispanics were more likely to be placed in higher-priced mortgages carrying heftier interest rates, which went into delinquency and default at higher rates than conventional loans eligible for purchase by Fannie Mae and Freddie Mac.