The Changing Face of Homeowners in Large Metro Areas

Transcription

1 By Nancy McArdle, Erin Hardy, Theresa Osypuk and Dolores Acevedo García May 2012 The Changing Face of Homeowners in Large Metro Areas Key Findings Between and, in the 100 largest metropolitan areas: Homeownership rates for blacks fell in 75 metros, with particularly severe declines in several Midwest metros, such as Kansas City, MO, Grand Rapids, MI, and Youngstown, OH. Latino homeownership rates declined in 38 metros, with certain Southern metros, including Jackson, MS, Baton Rouge, LA, and Augusta, GA seeing substantial declines. However, Latino homeownership increased in most metros and surged by over 10 percentage points in Charlotte, Greensboro, and Raleigh, NC. Asian homeownership rates saw strongest growth, increasing from 53% to 58% in large metros overall. 21 metros saw gains of 10 percentage points or more, led by New Haven, CT, Oklahoma City, OK, Memphis, TN, and Austin, TX. The number of Asian homeowners grew by 60.7%. Asians contributed a fifth of the net growth in homeowners. Latinos made up an increasing share of homeowners in all 100 large metros. Largest gains occurred in the West and South, particularly in CA, led by Bakersfield, Modesto, and Riverside. The white share of homeowners fell in 98 metros, with the largest percentage point decreases in Stockton, CA, Las Vegas, NV, Riverside, CA, Orlando, FL, and Atlanta, GA. National homeownership rates have fallen each year since 2004, reversing a decade long trend of steady growth. Declines have been particularly severe for blacks and Latinos in recent years. Nationally, and in three quarters of large metropolitan areas, the black homeownership rate was lower at the end of the last decade than at the beginning. Latino rates have also fallen nationally since However, in a majority of large metro areas, especially certain Southern metros, these recent declines have not completely erased Latino homeownership gains made in the earlier part of the last decade. Despite these reversals, ongoing demographic changes mean that minorities, particularly Latinos and Asians, now make up larger shares of homeowners in major metropolitan areas than they did a decade ago. After presenting an overview of annual, national trends in homeownership, this issue brief looks at two related but distinct housing indicators by race/ethnicity in the 100 largest metropolitan areas 1 over the to time period: homeownership (the share of all occupied homes occupied by the homeowner) and the racial/ethnic composition of homeowners. National Homeownership Rates Rise and Fall Over the s; Declines Particularly Steep for Blacks The to timeframe was characterized by two distinct periods. Continuing trends that were established in the 1990s and spurred by favorable mortgage terms during the early part of the s, national homeownership rates reached a peak of 69% in 2004 (Figure 1). Homeownership for all racial/ethnic groups rose over that period, with Asian gains especially strong. Increases for blacks and Latinos were more modest, following very robust growth in the mid to late 1990s. However, after 2004, national homeownership rates declined, falling to 66.9% by (and further to 66.1% by 2011). Homeownership rate 1 Metropolitan areas defined as of June 2003 by Office of Management and Budget. 100 largest metros are defined using population.

2 80 Figure 1 National Homeownership Rates by Race/Ethnicity: (Percent) \ \r Total Non Latino White Black Asian Latino Note: (1) From 1996 to 2002, those answering Other for race were allocated among the race categories. Break in data reflects revised methodology in Asians include Pacific Islanders. Source: U.S. Census Bureau, Housing Vacancy Survey, Annual Statistics. declines for blacks were steeper than for other groups, falling from 49.1% in 2004 to 44.9% in Indeed, by 2005, black ownership rates had dropped below those of Latinos and have remained lower since. Latino ownership rates peaked later, at 49.7% in 2007, and then dropped to 46.9% by Declines for non Latino whites (hereafter whites 2 ) and Asians were less pronounced. While the exact combination of causes leading to the disproportionate homeownership declines for blacks and Latinos is difficult to untangle, it is likely that the higher rates of foreclosure experienced by these groups played an important role. According to the Center for Responsible Lending in 2011, of loans originated between 2004 and 2008, approximately one quarter of all Latino and African American borrowers have lost their home to foreclosure or are seriously delinquent, compared to just under 12 percent for white borrowers. 3 High foreclosure rates for blacks and Latinos stem largely from disproportionately high usage of subprime loans as well as higher unemployment rates, factors which suggest that this disparity will likely continue in the future. Changing Homeownership Rates in Large Metro Areas The annual data on homeownership by race and ethnicity presented above for the nation as a whole are not reliably available at smaller levels of geography such as metropolitan areas. For more precise data by race and ethnicity at the metro area level, we must instead rely on the Decennial Census, which is only available every ten years. Therefore, the data presented in this section reflect the net changes over the to decade and do not distinguish and separately address the annual increases in homeownership that occurred during the early 2 Whites are defined as non Latino whites. All other racial groups include both Latino and non Latino members. 3 Bocian, Debbie Gruenstein, Li, Wei, Reid, Carolina, and Quercia, Roberto G. (2011) Lost Ground, 2011: Disparities in Mortgage Lending and Foreclosures. Durham, NC: Center for Responsible Lending. lending/research analysis/lost Ground 2011.pdf 2

3 part of the last decade and the annual declines of the later part of the decade, as discussed above for the nation as a whole. For the largest 100 metro areas combined, white homeownership rates rose slightly between and. Latino rates showed stronger growth, Asian rates grew very strongly, while black and Native American rates declined (Figure 2). The slight decline in the overall homeownership rate for the 100 largest metros, from 63.4% to 62.9%, reflects both changes in the housing market as well as the shifting composition of households living in metro areas, from whites (who have relatively high ownership rates), to larger shares of minorities (who have relatively lower rates). Over the decade, the composition of households in large metros declined from 69.9% white to 64.6% white. Figure 2 Homeownership Rate in 100 Largest Metros, by Race/Ethnicity: and (Percent) Total Non Latino White Black Latino Asian Native American The small change in white homeownership rates in large metros over the last decade can be seen more clearly in Figure 3, which shows the homeownership rate in along the horizontal axis and the rate in along the vertical axis. Each metro area is represented by a circle, with the size of the circle reflecting the metro area s total population and the color reflecting the metro s geographic region. Circles lying above the diagonal line represent metros which experienced homeownership increases over the decade, while those below the line represent metros which experienced decreases. The vertical distance from the diagonal line represents the magnitude of the homeownership change in percentage points. [Note: Homeownership rates for all metros and racial/ethnic groups for and can be found at For whites, 58 metros experienced homeownership increases, (Table 1) with most experiencing relatively small changes, as illustrated by the tight clustering of the circles around the diagonal line (Figure 3). Changes ranged from a decline of 3.9 percentage points in the El Paso, TX metro area to an increase of 3.5 points in Honolulu, HI. Metros with the 3

4 Figure 3 Non Latino White Homeownership Rate in 100 Largest Metros: and (Location Above/Below Line Indicates Increase/Decrease in Homeownership Rate) Percent Honolulu, HI El Paso, TX Note: Size of circle reflects metro area total population as of. Figure 4 Latino Homeownership Rate in 100 Largest Metros: and (Location Above/Below Line Indicates Increase/Decrease in Homeownership Rate) Percent Charlotte, NC Greensboro, NC Raleigh, NC Jackson, MS Note: Size of circle reflects metro area total population as of. 4

5 Figure 5 Black Homeownership Rate in 100 Largest Metros: and (Location Above/Below Line Indicates Increase/Decrease in Homeownership Rate) Percent Poughkeepsie, NY Honolulu, HI Worcester, MA Detroit, MI Kansas City, MO Minneapolis, MN Boise City, ID Note: Size of circle reflects metro area total population as of. Figure 6 Asian Homeownership Rate in 100 Largest Metros: and (Location Above/Below Line Indicates Increase/Decrease in Homeownership Rate) Percent Oklahoma City Memphis, TN Madison, WI New Haven, CT Austin, TX Salt Lake City, UT Scranton, PA Note: Asians include Pacific Islanders. Size of circle reflects metro area total population as of. 5

6 largest homeownership decreases and increases are presented in Table 2. The relatively small change in white homeownership rates should be seen in the context of already high white rates at the beginning of the decade, which may have resulted in relatively small marginal gains even in the absence of the foreclosure and mortgage market crisis. Latino ownership rates rose in 58 large metros as well, but both increases and decreases tended to be substantially larger than those experienced by whites (Figure 4). Latino rates rose by over ten percentage points over the decade in the Charlotte, NC, Greensboro, NC, and Raleigh, NC, metro areas, with large gains in a number of other Southeastern metros. On the other hand, some of the largest declines also occurred in the South, led by the Jackson, MS metro which saw a decline of almost 12 percentage points in its Latino homeownership rate, followed by Baton Rouge, LA and Augusta, GA (Table 2). Homeownership rates for blacks increased in only 24 of the largest metros, declining in 75 and remaining unchanged in one (Figure 5). Although the largest increase occurred in Honolulu, HI, many of the largest increases occurred in Northeastern metros, such as Poughkeepsie, NY, Worcester, MA, Allentown, PA, Hartford, CT, and Providence, RI. The largest decrease occurred in Boise City, ID, but most of the largest decreases were in Midwestern metros, including Kansas City, MO, Grand Rapids, MI, Youngstown, OH, and Detroit, MI. In fact, Madison, WI was the only larger Midwestern metro to post a (marginal) increase in black ownership. In sharp contrast, Asian homeownership rates rose in almost all (95) of the largest metros, with 21 seeing increases of ten percentage points or more (Figure 6). Large increases occurred in metros across the country, led by New Haven, CT, Oklahoma City, OK, and Memphis, TN. Only in Scranton, PA, Salt Lake City, UT, and Boise City, ID were there declines in Asian homeownership of two percentage points or more. Changing Racial/Ethnic Composition of Homeowners Table 1 Number of the 100 Largest Metros with Increases in Selected Indicators for Specified Groups: Number of Metros with Increases in: Ownership Number of Group's Share Rate Owners of Owners Non Latino White Black Latino Asian Examining homeownership rates allows us to understand the extent to which particular racial/ethnic groups have acquired their home as an asset, often with corresponding debt, as opposed to renting their homes. However, race specific homeownership rates are not affected by the total number of households of a particular racial/ethnic group living in an area, and so they give us no information on the extent to which particular groups now constitute a greater or lesser share of homeowners overall in that area. Homeownership rates can be high, regardless of whether there are a thousand homeowners in an area or a million, as long as the number of owners is high relative to the number of renters. Furthermore, homeownership rates can decline, even if the number of homeowners is increasing, as long as the number of renters is growing at a faster rate than the number of owners. Therefore, in addition to assessing changing homeownership rates, it is also valuable to understand the extent to which the population of homeowners is changing in composition, according to race/ethnicity. Over the to decade, the net number of homeowners in the 100 largest metro areas increased by about 4.5 million, or 10.5%. It is important to keep in mind that this is a net increase. More than 4.5 million 6

7 Table 2 Metro Areas With Largest Percentage Point Decreases (or Smallest Increases) in Homeownership Rate by Race/Ethnicity: Largest Metro Areas Owner Rate (%) Owner Rate (%) Owner Rate (%) Owner Rate (%) White Change Black Change Latino Change Asian Change El Paso, TX Boise City, ID Jackson, MS Scranton, PA Cape Coral, FL Kansas City, MO Baton Rouge, LA Salt Lake City, UT Sarasota, FL Grand Rapids, MI Augusta, GA Boise City, ID McAllen, TX Youngstown, OH Youngstown, OH Youngstown, OH Tampa, FL Detroit, MI Chattanooga, TN Oxnard, CA Boise City, ID Minneapolis, MN Akron, OH Honolulu, HI Lakeland, FL Phoenix, AZ San Jose, CA Los Angeles, CA Los Angeles, CA Des Moines, IA Denver, CO San Francisco, CA Chattanooga, TN Akron, OH Knoxville, TN Buffalo, NY Phoenix, AZ San Jose, CA New Orleans, LA San Jose, CA Metro Areas With Largest Percentage Point Increases in Homeownership Rate, by Race/Ethnicity: Largest Metro Areas Owner Rate (%) Owner Rate (%) Owner Rate (%) Owner Rate (%) White Change Black Change Latino Change Asian Change Honolulu, HI Honolulu, HI Charlotte, NC New Haven, CT Worcester, MA Poughkeepsie, NY Greensboro, NC Oklahoma City, OK Hartford, CT Worcester, MA Raleigh, NC Memphis, TN Madison, WI Provo, UT Greenville, SC Austin, TX Springfield, MA Allentown, PA Nashville, TN Worcester, MA Houston, TX Hartford, CT Dallas, TX Madison, WI Dallas, TX Providence, RI Memphis, TN Columbia, SC Boston, MA New Orleans, LA Atlanta, GA Birmingham, AL Poughkeepsie, NY New Haven, CT Madison, WI Allentown, PA Provo, UT Bridgeport, CT Provo, UT Columbus, OH Notes: Whites include only non Latino whites. Asians include Pacific Islanders. Latinos may be of any race. Metro area names include only first named component city. Source: and Decennial Censuses, Summary File 1. 7

8 new homeowner households were formed over the decade, but many were also lost, whether due to transition to rentership or dissolution of a household altogether. On net, however, there were roughly 4.5 million more homeowner households in large metro areas in than in. By far, Latinos saw the largest growth of net new owners in the 100 largest metros, with almost 1.7 million more Latino owners in than in, a growth rate of 51.7%. By comparison, the number of Latino households, both renter and owner, grew by 44.4% over the period. Latinos contributed 37.3% of the net growth in all owner households. Accordingly, the share of homeowners who are Latino rose from 7.6% to 10.4%. (Table 3) Despite this growth, in large metros, the Latino share of homeowners (10.4%) is still substantially less than the Latino share of all households (14.2%). Table 3 Homeownership and Racial/Ethnic Share of Homeowners in 100 Largest Metro Areas: Homeownership Rate (%) Number of Owners (Thousands) Group's Share Of Growth in # of Owners (%) Group's Share of Owners (%) Change (#) Change (%) Total ,756 47,230 4, Non Latino White ,537 34,766 1, Black ,916 4, Latino ,230 4,900 1, Asian ,519 2, Nat. American Notes: Asians include Pacific Islanders. Latinos may be any race. Groups will not sum to total because of exclusion of "Other" and "Multi Racial" groups not shown separately and because Latino members of the Black, Asian, and Native American races are counted in both the Latino group and in their individual race group. Source: and Decennial Censuses, Summary File 1. The number of white owners increased by 1.2 million, yet this reflects a growth rate of just 3.7%, based on the large initial number of white homeowners existing in. In 25 metros, the absolute number of white homeowners was actually lower in than it was in. Because the white population is relatively old, especially in comparison to the Latino population, many more white owner households were lost for reasons due to age, such as moving in with relatives, moving into an institutional facility such as a nursing home, or dying. The share of homeowners who are white fell from 78.4% to 73.6% in large metros over the decade. Blacks posted the smallest net growth in number of owners of all major racial, ethnic groups, increasing by about 600,000, for a growth rate of 15.5%. Their share of all homeowners rose from 9.2% to 9.6% from to. The number of Asian owners grew tremendously relative to their initial number, with roughly 920,000 net owners added, for a growth rate of 60.7%. A fifth of the net growth in homeowners was Asian, as Asians increased their share of all owners from 3.6% to 5.2%. 8

9 The changing composition of homeowners in individual metros can be seen more specifically in Figures 7 through 10. Once again, each circle represents one of the largest 100 metro areas, with the size of the circle representing the metro s total population and color representing its geographic region. In these figures, the horizontal axis reflects the specified group s share of metro area homeowners in, while the vertical axis represents the group s share of metro area homeowners in. Circles above the diagonal line represent metro areas where the specified racial/ethnic group s share of homeowners increased over the period. Metro areas posting the largest changes in racial/ethnic composition are also listed in Table 4. Figure 7 illustrates the declining white share of homeowners in most metro areas (circles falling below the diagonal line). In only two metros, Charlestown, SC and Honolulu, HI, were whites a larger share of homeowners in than they were in, and only by very small amounts. In Stockton, CA, Las Vegas, NV, and Riverside, CA, the white share declined by about 10 percentage points over the decade. Many of the metros posting the largest declines in white share of owners are located in the South and West (light green and orange circles.) Many of these metros already had relatively low white shares of homeowners at the beginning of the decade, as evidenced by the circle location toward the middle of the figure, rather than toward the upper right. In sharp contrast, all of the largest 100 metros showed both an increasing net number of Latino homeowners and an increasing Latino share of homeowners. The largest increases in Latino share of homeowners occurred in Southern and Western metros, led by Bakersfield, CA, Modesto, CA, Riverside, CA, El Paso, TX, and Miami, FL (Figure 8). With the exception of Atlanta, GA, most large metros saw relatively little change in their black share of homeowners. In Atlanta, blacks went from one fifth of all owners to one fourth. The number of black owners in Atlanta grew by about 113,000, more than twice the growth experienced by any other metro. Other metros with increasing black shares of owners also tended to be located in the South, including Charlotte, NC, Jackson, MI, and Miami, FL (Figure 9). The absolute number of Asian owners rose in all 100 large metro areas, and the Asian share of homeowners rose in all metros except Honolulu, HI, where it was already at a very high level (65%) as of. Particularly strong growth in the Asian share of owners occurred in Western metros. Five of the six metros posting strongest growth are located in California, led by San Jose, where 30% of owners were Asian as of, and San Francisco, where 22% of owners were Asian (Figure 10). Discussion For generations, homeownership has been viewed as the epitome of the American dream, the prime vehicle for household wealth creation, and a stabilizing force in communities. The recent housing crash has shaken all of these premises, yet most Americans still aspire to homeownership, and their home represents their single largest asset, especially for black and Latino households. The rollercoaster ride of homeownership over the s affected black households particularly severely, leaving them with lower homeownership rates at the end of the decade than at the beginning. Because this group continues to face high unemployment rates, disproportionate use of subprime mortgages, and difficulties in accessing new mortgage credit, the challenges are unlikely to end soon, barring a sustained economic recovery and more effective policies to allow underwater owners to reduce mortgage debt and avoid foreclosure. Indeed, new restrictions and tightening of underwriting guidelines of government backed mortgages such as 9

10 Figure 7 Non Latino White Share (%) of Homeowners in 100 Largest Metros: and (Location Above/Below Line Indicates Increase/Decrease in Percent of All Owners that are Non Latino White ) Charleston, SC Honolulu, HI Riverside, CA Stockton, CA Las Vegas, NV Orlando, FL Note: Size of circle reflects metro area total population as of. Figure 8 Latino Share (%) of Homeowners in 100 Largest Metros: and (Location Above/Below Line Indicates Increase/Decrease in Percent of All Owners that are Latino) El Paso, TX McAllen, TX Modesto, CA Bakersfield, CA Riverside, CA, CA Note: Size of circle reflects metro area total population as of. 10

11 Figure 9 Black Share (%) of Homeowners in 100 Largest Metros: and (Location Above/Below Line Indicates Increase/Decrease in Percent of All Owners that are Black) Atlanta, GA Jackson, MS Memphis, TN Charleston, SC Note: Size of circle reflects metro area total population as of. Figure 10 Asian Share (%) of Homeowners in 100 Largest Metros: and (Location Above/Below Line Indicates Increase/Decrease in Percent of All Owners that are Asian) Honolulu, HI San Francisco, CA San Jose, CA Note: Asians include Pacific Islanders. Size of circle reflects metro area total population as of. 11

12 Table 4 Metro Areas With Largest Percentage Point Decreases (or Smallest Increases) in Racial/Ethnic Group's Share of Homeowners: Largest Metro Areas Share (%) Share (%) Share (%) Share (%) White Change Black Change Latino Change Asian Change Stockton, CA Charleston, SC Pittsburgh, PA Honolulu, HI Las Vegas, NV San Francisco, CA Akron, OH Youngstown, OH Riverside, CA Detroit, MI Jackson, MS El Paso, TX Orlando, FL Kansas City, MO Youngstown, OH Toledo, OH Atlanta, GA Austin, TX Dayton, OH Scranton, PA San Jose, CA Chicago, IL St. Louis, MO Jackson, MS Miami, FL Los Angeles, CA Buffalo, NY Knoxville, TN Houston, TX Youngstown, OH Syracuse, NY Boise City, ID Bakersfield, CA Richmond, VA Cincinnati, OH Ogden, UT Modesto, CA Greenville, SC Cleveland, OH Syracuse, NY Metro Areas With Largest Percentage Point Increases in Racial/Ethnic Group's Share of Homeowners: Largest Metro Areas Share (%) Share (%) Share (%) Share (%) White Change Black Change Latino Change Asian Change Charleston, SC Atlanta, GA Bakersfield, CA San Jose, CA Honolulu, HI Charlotte, NC Modesto, CA San Francisco, CA Youngstown, OH Jackson, MS Riverside, CA Stockton, CA Pittsburgh, PA Miami, FL El Paso, TX Las Vegas, NV Detroit, MI Poughkeepsie, NY Miami, FL Los Angeles, CA Buffalo, NY Greensboro, NC Houston, TX Sacramento, CA Dayton, OH Orlando, FL Orlando, FL Seattle, WA Cleveland, OH Memphis, TN Stockton, CA Washington, DC Chattanooga, TN Palm Bay, FL Dallas, TX New York, NY Akron, OH New Haven, CT Fresno, CA San Diego, CA Notes: Whites include only non Latino whites. Asians include Pacific Islanders. Latinos may be of any race. Metro area names include only first named component city. Source: and Decennial Censuses, Summary File 1. 12

13 those insured by the Federal Housing Administration, which are currently used by significant shares of black homebuyers, may make homebuying even more difficult. Latino households have faced similar challenges: high unemployment, high use of subprime mortgages, and difficulty accessing credit, with the added problem of high population concentrations in states experiencing some of the most precipitous housing downturns, such as in California and Florida. While national Latino homeownership rates were still higher in 2011 than they were in, the annual trend is distinctly downward since 2007, and 38 of the 100 largest metros experienced homeownership declines over the to decade as a whole. Still, the very large gains achieved in certain areas, such as Charlotte, Greensboro, and Raleigh, NC, prior to the housing crisis are not likely to be completely reversed despite the continued housing market difficulties. An important factor in Latino homeownership trends is the dramatic slowdown in net immigration over recent years. New immigrants are much more likely to be renters than are longer term immigrants, and a reduction in the inflow of new immigrants will lead to an increase in homeownership rates. Similarly, Latino renters are arguably more likely to return to their countries of origin during difficult economic times than are homeowners, also leading to a boost in homeownership rates. While these factors may lead to an increasing Latino homeownership rate in a statistical sense, they do not reflect the same type of progress that would occur if significant numbers of Latino households were becoming new homeowners. Whatever the future of their homeownership rates, however, it is almost assured that Latinos will increase their share of the homeowning population as their total population grows, especially in prime home buying ages. Although Asian homeownership has declined over the last few years, Asians posted the strongest gains of any group over the aggregate to period, with very large gains in over a fifth of large metros, despite their very heavy concentration in geographic areas experiencing severe housing downturns. The Asian population is extremely diverse, but, as a whole, their relatively low unemployment rates and low usage of subprime credit should help insulate them from the challenges facing blacks and Latinos. Other research has documented the stark declines in the value of Asians home equity 4, but, to date, this has not led to a downturn in homeownership substantial enough to offset the homeownership gains they achieved in the early s. Non Latino whites still account for almost three quarters of homeowners in large metro areas, but this share is steadily declining. In a quarter of large metros, fewer white owners existed in than in. The decline in white share of homeowners may pause to some extent, as whites account for a larger share of homebuyers and have had lower foreclosure rates than black and Latinos in very recent years. However, demographic trends suggest that, over the longer period, the American homeowner will increasingly be a person of color. Already, in 14 of the largest metros, the white share of homeowners is below 60%. In many metro areas, the challenges and opportunities facing homeowners and potential homebuyers of color have major impacts on housing markets and communities overall, a trend that is sure to both continue and to expand to other areas. To investigate homeownership, mortgage lending or a multitude of other opportunity indicators for your metro area or any metro area, visit 4 Taylor, Paul, Kochhar, Rakesh, Fry, Richard, Valesco, Gabriel, and Motel, Seth. (2011) Twenty to One: Wealth Gaps Rise to Record Highs Between Blacks, Whites, and Hispanics. Washington, D.C. Pew Research Center. Wealth Report_ _FINAL.pdf 13