White Neighborhoods Had the Largest Absolute-Dollar Gains
Based on a new report by Redfin, U.S. homeowners in white, minority and mixed-race neighborhoods posted substantial gains in home equity from 2012 to 2018.
The report also shows that minority neighborhoods started with the lowest levels of home equity but had the largest percentage gains. White neighborhoods had the lowest percentage gains in home equity, but the largest gains in absolute dollars. Meanwhile, the home-equity gap between white and minority communities widened to $94,000 in 2018.
"Home prices over the last six years rose most steeply in minority communities, and unlike in past booms when Americans just borrowed more and more money, these price gains led to real increases in wealth for homeowners of color," said Redfin CEO Glenn Kelman. "But even though homeowners in mostly minority communities had the largest percentage gains in home equity, it was the folks living in mostly white neighborhoods who had the largest dollar gains, just because they had so much more home equity at the beginning of the recovery. This just goes to show that, even as a strong market broadly benefits homeowners, it's still very hard for people starting with less money ever to catch up. On an absolute-dollar basis, homeowners in minority communities became wealthier, but still fell further behind."Metro-level highlights include:
- Riverside, CA is the only metro area in the study where minority communities posted the largest equity gains in absolute dollars, followed by mixed-race and then white neighborhoods.
- Denver's minority zip codes were home to the biggest percentage increase in home equity among all the groups of communities in the study, up 452%.
- All but three of the 16 metros saw the equity gap between white and minority communities widen. Riverside and Miami saw this gap narrow; in Boston, the gap was unchanged.
Redfin's analysis is based on data on home values in white, minority, and mixed-race zip codes in the 16 most populous metropolitan areas for which Redfin tracks historical home-sale price data. To measure home equity, analysts used the Redfin Estimate, the automated home-value estimate with the industry's lowest published error rate for listed homes, as well as loan information from county records. Analysts considered a zip code "white" if less than 25 percent of its households were not white, according to Census data as of 2016.
They considered a zip code a "minority" community if more than 50 percent of its households were African American, non-white Hispanic or Asian. Redfin defined a community as "mixed-race" if between 25 and 50 percent of its households were not white.
It's worth noting that this data does not account for people who lived in but never owned homes in these communities. As home prices appreciated faster than wages, it's likely that many people became less able to buy homes in their neighborhoods, and have thereby been excluded from the wealth gains afforded by home-equity growth in the past six years.