Black first-time homebuyers see strongest rebound despite affordability challenges, Zillow says

LOS ANGELES - The number of Black first-time homebuyers is growing despite ongoing affordability challenges, according to a new report from Zillow.

In 2023, 63% of Black homebuyers were purchasing their first home, up from a record-low 35% in 2021. The increase comes at a time when Black households face lower incomes, higher mortgage denial rates, and fewer affordable housing options compared to white households.

Homeownership is considered a key factor in building wealth, but the Black homeownership rate remains just 45%, far below the 65% U.S. average. That number is also lower than its peak of 49.7% in 2004.

Housing affordability has worsened in recent years, but Black homeownership still increased more than white homeownership over the same period.

Where Black buyers are finding affordable homes

By the numbers:

Some housing markets offer more affordable options for Black households than others. According to Zillow, the most affordable cities for Black homebuyers in 2024 were:

• St. Louis – 30.3% of listings were affordable
• Birmingham – 29.5%
• Memphis – 29.0%
• Detroit – 28.6%
• Baltimore – 25.8%

Other relatively affordable markets included Pittsburgh, Cleveland, Indianapolis, Atlanta, and Oklahoma City.

The least affordable markets were on the West Coast, particularly in California cities and Seattle, where high home prices and strict housing regulations have made it harder for Black households to buy homes.

Why Black homebuyers are still struggling with affordability

Dig deeper:

Even as homeownership rates increase, affordability remains a major challenge:

• In 2024, the typical Black household could afford only 18% of homes for sale, compared to 38% for white households.
• Before the pandemic, 34% of homes were affordable for Black buyers, showing a steep decline in recent years.

FILE - A For Sale sign hangs in front of a house. (Photo by Steve Pfost/Newsday RM via Getty Images)

Black homebuyers also face higher mortgage denial rates. In 2023:

• 24% of Black applicants were denied mortgages, compared to 13% for all applicants.
• 43% of denials were due to lack of credit history.

Lower credit scores also mean higher mortgage rates, making homeownership even more expensive. However, in 2023, a policy change by Fannie Mae and Freddie Mac reduced penalties for lower credit scores, offering some relief.

How remote work is helping Black renters buy homes

Remote work has given some Black renters new opportunities to become homeowners.

• Black renters were 29% more likely than others to relocate for affordability due to remote work flexibility.
• Moving to lower-cost housing markets increases the chances of buying a home.
• The shift to remote work has been especially beneficial for lower-income households, allowing them to move to more affordable areas.

Black homeowners are gaining equity

Even though buying a home remains a challenge, Black homeowners have seen their property values rise faster than any other racial group.

• Black home values have increased 42.5% since February 2020.
• The typical Black homeowner has gained nearly $84,000 in home equity since the pandemic.

Despite these gains, Black-owned homes still have lower values than the typical U.S. home, reflecting ongoing racial wealth disparities.

What could help close the homeownership gap?

Experts say policy changes could help more Black households achieve homeownership:

• Building more homes – Easing construction restrictions could lower prices and expand access.
• Improving credit history access – Allowing rent payments to count toward credit scores could help more Black renters qualify for mortgages.
• Expanding financial services – Increasing access to banking and homebuyer assistance programs in Black communities could help bridge the racial wealth gap.

Even with these challenges, the rising share of Black first-time homebuyers shows that more Black households are determined to buy homes despite rising costs.