There is a large “valuation gap” between black and white homeowners.
Home appraisal value in predominantly black and Latino neighborhoods is often much lower than homes in predominantly white communities, recent study finds analysis by Freddie Mac.
The government’s chartered mortgage giant’s analysis includes more than 12 million home appraisals and shows where in the United States those appraisals were made. The researchers found that 12.5% of homes rated in black communities were rated at less than the home’s initial cost of building. That figure compares to 7.4% of homes in white neighborhoods and 9.4% of homes in Latin American areas, according to the analysis.
The differences suggest that there is a “valuation gap” among owners of color and that it exists across the country, officials at Freddie Mac said. Michael Bradley, senior vice president of Freddie Mac, said in a declaration that the gap “could also mean that families might miss out on all of the wealth-building benefits of homeownership or might be unable to secure the financing needed to make the American dream come true in the first place.”
For some black and Latino families, owning a home is the first step in building generational wealth. A valuation spread would likely prevent these households from increasing their home equity, which would reduce their chances of borrowing against the property or selling it for a better profit later.
In addition to the valuation gap found by Freddie Mac, studies have shown that black and Latino homebuyers have to manage Black home buyers in less desirable neighborhoods.– and when they acquire a loan, it sometimes carries a higher interest rate than for whites in similar economic circumstances. In some cases, real estate agents are known to
In April, homeownership rates for blacks, Hispanics and whites in the United States were 44%, 47% and 74%, respectively, according to the St. Louis Fed. The data.
Years of discrimination
To some extent, the data collected by Freddie Mac – who buys mortgages from commercial banks to help lower the costs of borrowing to buy a home – validates the many anecdotal allegations of discrimination that black and Latino homeowners say they have. suffered for years.
African-American landlord who had her home in historic Indianapolis assessed for $ 110,000 even though the actual value was closer to $ 259,000. Owner Carlette Duffy is now suing appraiser she says undervalued her property, the Indianapolis Star reported.
In Ohio, black homeowners Erica and Aaron Parker reportedly had their home appraised for $ 465,000. The couple then decided to delete their family photos and replace them with photos of white people before getting a second review, USA Today. reported. The second valuation was $ 557,000.
Housing discrimination experts say Freddie Mac’s analysis highlights racial bias prevalent in home ratings.
“What you have is arguably the most data-rich organization that publishes a scathing report on valuers,” Brookings senior associate Andre Perry told CBS MoneyWatch. “It’s the biggest authority on housing, and they’re basically saying there’s a rater bias that robs people of wealth.”
The report also highlights the role of automated property appraisal services as a means to combat racism, added Perry, author of “Know Your Price: Valuing Black Lives and Property in America’s Black Cities.”
“It will force the [appraisal] the industry really has to deal with its members and with racism, ”he said. “If you have an authority like Freddie issuing this report, there should be some type of follow-up and advice on how to hold people accountable. “
Freddie Mac’s data was based on ratings of single-family homes in the nation’s top 30 metropolitan areas. The reviews reviewed were submitted between January 2015 and December 2020. The research does not explain the cause of the discrepancy.