In a real estate market as hot as Philadelphia's right now, it's no secret that buyer frustration abounds. Few homes remain on the market, prices in some neighborhoods are higher than they were a decade ago, and many shoppers struggle to find enough cash for a down payment.
It's even worse if you're a minority.
According to figures released by the housing website Zillow this year, less than a quarter of homes nationwide are owned by minorities — despite the fact that African Americans, Hispanics, Asians, and other nationalities make up nearly one-third of the U.S. population.
And in Philadelphia as well as nationwide, there are few signs of significant improvement.
Low minority home-ownership rates, Zillow and other experts say, is the result of decades of discriminatory housing policies, financial hurdles, and market conditions that have disproportionately affected people of color. At the same time, continued residential segregation — essentially, residents choosing to live in neighborhoods made up of people of their same race — has posed an equally large problem for boosting minority home ownership, the experts say.
The combination of such factors has created the problems that continue to perpetuate the barriers that minorities face when buying a home today. How exactly did we get here — and where does that leave us?
The origin of the modern minority home-ownership problem can be traced to the 20th century, when the Federal Housing Administration actively engaged in "redlining," a practice of determining which neighborhoods to approve mortgages in — and which to deny them. From the 1930s through the 1960s, the FHA explicitly refused to back loans for African American home buyers — subsequently pushing many of them into declining and high-poverty areas. From there, some minorities were victims of predatory lending. Or, they were relegated to renting, pushed out of homeownership entirely.
Today, redlining is illegal. But its aftermath is still palpable. According to Camille Charles, a sociology professor at the University of Pennsylvania, the United States remains residentially segregated — with Philadelphia ranking as more segregated than most cities.
"Segregation concentrates poverty in ways that are detrimental to the flourishing of those neighborhoods," Charles said in a recent interview.
According to Charles, who studies residential segregation and the behaviors that drive it, redlining created a self-fulfilling prophecy: Government policies shepherded minorities to certain neighborhoods, and now, based on the natural preference of wanting to avoid living in areas filled with people who are different from us, minority groups continue to want to live in the same areas together, she said.
That can be problematic for minority homeowners who want to build wealth, Zillow's data and other studies point out. According to one study by Brandeis University, homes in black neighborhoods do not see the same appreciation rates as homes in white neighborhoods. One reason for that, the study said: a lack of demand from wealthy white households, which, in turn, stifles home price appreciation rates in those neighborhoods.
At the same time, Zillow found, minority homeowners were disproportionately affected by the recession. While many homeowners across the United States went through foreclosure or were left underwater — owing more for their homes than their homes were worth — that negative equity rate has dipped to just 10 percent nationally in the last year. However, for black communities, Zillow found, nearly 20 percent of homeowners had homes underwater in the third quarter of 2016. For Hispanic communities, it was 12 percent.
In majority-white communities, that rate was less than 10 percent.
Minority home shoppers also face financial barriers more often than white populations, the Zillow report found. African Americans and Hispanics are less likely to apply for a mortgage and are more likely to be denied when they do. They also have more difficulty, the study showed, cobbling together a down payment. African American and Hispanic buyers struggle more often with all aspects of financing a home, from pre-approval to the underwriting process. And minorities more frequently struggle to find the right real estate agent to help them.
"In general, I think [minorities] have to work harder to get the kind of services that whites get in the normal course of things," Charles said. Minorities "more often encounter steering [from agents] who might say, 'No, I think you might like this neighborhood better.' … We know there is still housing market discrimination that takes a different form now."
Given all that, have minority home shoppers grown more pessimistic about owning a home?
Not at all, the Zillow study found. In fact, minorities aspire to be homeowners more than white residents, with nearly three-quarters of minorities thinking about owning their home one day, compared with 64 percent of Caucasians. And, the study found, they are more likely to believe in the American dream.