Little progress against the racial ownership gap, and black homeowners accrue roughly one-third of the wealth-building benefits of homeownership over 30 years as compared to white homeowners.
The National Association Real Estate Brokers (NAREB), founded in 1947, is the oldest minority professional trade association in the country. NAREB’s Twin Cities chapter was launched in 2016 by a small group of committed industry professionals including founding president Richelle Taylor. The group’s current president is Trent Bowman. Last month, NAREB released its annual State of Housing in Black America report. We sat down with Bowman to learn more about the organization, and discuss the report’s findings on homeownership and how they compare to the statistics here in Minnesota.
“NAREB Twin Cities exists to facilitate collaboration, partnership, education and the sharing of information,” says Bowman. “We strive to empower our communities to increase homeownership through education, financing and other resources. Minnesota has one of the highest homeownership gaps between white and black households in the country, and we are all working together to try and change this and bring the wealth-building opportunities intrinsic to homeownership to those who have been systematically excluded for so long.”
It’s a delicate dance. Bowman says that while homeownership is a worthy goal, the means of achievement make all the difference when it comes to wealth building. “Homeownership has to be accomplished with an eye toward maximizing wealth-building potential,” he states. “Maybe you qualify for a first-time homebuyer product that works with your 640 credit score. But why not do the work required to raise that score to 700-plus. Then you can choose from a range of products with a range of interest rates. Interest cuts into wealth building, and the lower the rate, the more cash you keep. Take a step back, so you can take two steps forward.” Bowman also believes in buying the home you can afford. “Just because you’re offered $300K by your loan officer doesn’t mean you shouldn’t bother looking at homes selling for less. If you end up with a mortgage payment that’s the same as you were paying in rent, great. But if you can come out of the buying process with a payment that’s substantially less, that’s instant wealth building.”
One of the more troubling findings in the report is the fact that black homeowners accrue roughly one-third of the wealth-building benefits of homeownership over 30 years as do white homeowners. Bowman attributes this to the factors above, as well as to systemic racism built into the system. “If you’re paying a higher interest rate on your loan, and your home is in a neighborhood that was historically redlined and neglected by city government, price appreciation over time isn’t going to make as much progress against your out-of-pocket costs as it will for your white neighbor with a low interest rate who owns a home in a trendy section of the city.”
“Even down payment assistance can skew things,” Bowman adds. “While many programs forgive the assistance funds over time, others require funds be paid back at the end of the loan term or when selling the house. If the funds need to be paid back, that’s wealth that doesn’t go to you. It’s fair – the funds helped you to achieve ownership when you may not have been able to do so on your own. But a buyer needs to fully understand this before the purchase, and its impact on wealth building as a component of homeownership needs to be acknowledged. In short, for assistance that must be paid back, use only what you need. Your dream home is the home you can afford.”
When it comes to progress against the racial homeownership gap, Bowman says, the more things change, the more they stay the same. “We’re not moving the needle,” he states. “In 2020, the national-level black-white ownership gap was 26 percent. Here in Minnesota the gap is twice that. Sixty years ago, the national gap was 26.8 percent. And that was before passage of the Fair Housing Act. Where’s the progress? Black homeowners are still at the bottom. This tells me that, as an industry, we’re still doing something wrong. We need to figure out how to move this needle.”
Bowman remains confident that progress toward eliminating the homeownership gap and equalizing the wealth-building potential of homeownership can be made if the industry works together with consumers and nonprofits like the Minnesota Homeownership Center to build deals that benefit everyone. “A potential homebuyer should never hear ‘no’ when they apply for a mortgage. Rather, they should be referred to a homeownership advisor for their own personal road map to ‘yes.’ That’s one of my trademark phrases – never a fast ‘no,’ but rather a slow ‘yes.’”