Rising population rates and a shrinking racial wealth gap have led to a rise in new mortgage applications among homebuyers of color, according to Redfin’s latest report.

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Census data isn’t the only way to track America’s diversifying population. Mortgage origination data also provides keen insight into how the U.S. is changing and how housing and income trends are impacting the nation’s various racial and ethnic groups.

Seattle-based brokerage Redfin’s latest report, based on Home Mortgage Disclosure Act (HMDA) data, revealed the share of new mortgages going to white homebuyers slid from 70.4 percent in 2018 to 62.2 percent in 2023, while the share of new mortgages going to homebuyers of color climbed from 29.6 percent to 37.8 percent during the same period.

Elijah de la Campa | Credit: LinkedIn

“The pool of homebuyers taking out mortgages is becoming less white because America is becoming more diverse, and many people of color are in their prime homebuying years,” Redfin Senior Economist Elijah de la Campa said in a written statement.

“The racial wage gap, while still sizable, has also been shrinking. That has made homeownership more feasible for some Black and Hispanic people, though they’re still significantly less likely to own homes than white people.”

From 2018 to 2023, Hispanic homebuyers led the charge on the share of new mortgages taken out by homebuyers of color. This group’s share of new mortgages grew from 11 percent in 2018 to 14 percent in 2023 — a 27 percent increase.

Black homebuyers experienced a 22 percent increase in new mortgages, growing from 7.1 percent to 8.7 percent by 2023. Meanwhile, Asian homebuyers experienced a 28 percent increase in new mortgages, going from 6.4 percent to 8.2 percent during the same period.

De la Campa said the boost in new mortgage rates is attributed to population and income gains, which simultaneously have created a bigger pool of homebuyers with greater incomes.

The U.S.’s white population shrank from 84.1 percent in 1970 to 59.5 percent in 2022; meanwhile, the Hispanic population (4.1 percent to 18.8 percent) and Black population (11 percent to 12.2 percent) have grown. Redfin didn’t highlight historical population data about the Asian population because the Census lagged in properly accounting for the various ethnic groups.

The median incomes for Hispanic households (+40.2 percent), Black households (+34.7 percent) and Asian households (+36.4 percent) have grown at a faster rate than the median income of white households (+31 percent) since 2018. The median income for Black ($54,000) and Hispanic ($69,000) households is still considerably less than their white ($86,000) and Asian ($114,000) counterparts; however, the percentage gains in median incomes show a slimming racial wage gap.

“The racial wage gap remains large, but has shrunk in recent years, in part due to a tight labor market,” the report read. “When the labor market is tight, employers are often less selective and look for candidates outside of their networks, which provides opportunities for marginalized communities.”

Another factor in new mortgage application growth is current homeownership rates. Seventy-four percent of white people are homeowners — compared with 62.2 percent of Asian, 49.9 percent of Hispanic and 45.7 percent of Black people.

“Home purchases have dropped across the board over the past year due to rising mortgage rates and high home prices, but it’s notable that the declines were more severe among white people,” the report said of the overall drop in mortgage applications this year. “While white people are the most likely to be homeowners, it’s worth noting that their homeownership rate has stagnated in recent years while the homeownership rates for Hispanic, Black and Asian people have climbed — helping to narrow the gap slightly.”

Email Marian McPherson

homebuying | Redfin
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