Home affordability is more challenging for Black families in several ways, a new study from Redfin revealed.
The typical Black household can afford a starter home in just 10 of the 50 most populous U.S. metros, with Detroit ranking as the most affordable for families looking to buy a starter home. The typical white family can afford a starter home in 32 of the 50 most populous U.S. metros, over three times more.
Using the general rule that a household should spend no more than 30% of its income on monthly housing costs, Redfin made its determinations by weighing median income, liquid assets and other considerations.
“Starter homes have become increasingly difficult for everyone to afford, with prices of the typical starter home up 8% in the last year alone. That has pushed buyers who earn more money to buy starter homes and pushed lower-income buyers out of the market altogether–and many of those lower-income buyers are Black,” said Redfin Senior Economist Elijah de la Campa. “The encouraging news is that while there’s still a major homeownership gap between Black and white families, there are signs more Black Americans could start getting their foot in the door: The share of U.S. mortgages taken out by Black homebuyers has ticked up recently, and the racial wage gap is shrinking.”
In Detroit, a family earning the local median income for a Black household would spend 16% of their earnings to afford the median-priced starter home, taking current mortgage rates into account. In Detroit, the typical starter home costs just $66,000 and comes with a median monthly payment of $579.
Detroit, which is the most affordable metro area for Black families purchasing a starter home, is followed by St. Louis, where a family earning the local median income for a Black household would spend 21% of their earnings to afford the typical starter home. Next up is Baltimore (23%), followed by Indianapolis (26%), Philadelphia (27%), Cleveland (27%), and Pittsburgh (29%).
Starter homes are least affordable to the typical Black household in San Francisco, where a Black family earning the local median income would have to spend more money than they make (104% of their earnings) on the typical starter home. This is the highest share in the country, followed by neighboring San Jose, where the typical Black family would spend 89% of their income on a starter home. Rounding out the top five are Los Angeles (81%), San Diego (78%), and Anaheim (71%).
It’s essentially impossible for typical Black families to afford starter homes in much of California, even with healthy earnings, because it’s home to such expensive housing markets, Redfin reported. In San Francisco, where the median household income for Black households is $81,205, starter homes are unaffordable because the median-priced starter home costs nearly $1 million and the monthly payment is over $7,000.
Nationwide, a household earning the median U.S. income for Black families ($57,129) would spend 41% of their earnings to afford the typical U.S. starter home, which costs $250,000 and comes with a monthly payment of $1,960 at the current average mortgage rate.
For comparison, a household earning the median U.S. income for white families ($90,995) would spend 26% of their earnings to afford the typical starter home.
Meanwhile, a household earning the median U.S. income for Asian-American households would spend 20% of their earnings to afford the typical starter home. Hispanic households would spend 32% of their incomes on the median-priced starter home.
The last time starter homes were affordable to a Black family earning the median income was January 2022, just before mortgage rates started increasing. Black families have less generational wealth, stemming from the nation’s history of systemic racism. Decades of redlining, racist housing covenants and other discriminatory policies have made housing unaffordable for Black homebuyers. As a result, less than half (45.9%) of Black Americans own their homes, compared with 73.8% of white Americans.
