A new study is raising alarm about trends among Black and Latino homebuyers that its authors say could worsen the state’s racial wealth gap.
A 2015 Federal Reserve Bank of Boston study found that the median Black family in Greater Boston has a net wealth of $8, while the median Latino family, depending on their background, has a net wealth of between $0 and $3,020, while the median white family has a net worth of $247,500. The study concluded that a large part of this disparity is tied up in a homeownership gap. Only about a third of Black households and one-fifth of area Dominican and Puerto Rican households in Greater Boston own their homes, while roughly 79 percent of area white households own their homes.
Priced out of Boston’s historic neighborhoods of color, Black and Latino residents are increasingly purchasing homes in the state’s lower-cost Gateway Cities like Lawrence and Springfield according to data MassINC’s Gateway Cities Innovation Institute researchers obtained through the Home Mortgage Disclosure Act (HMDA). These records include most mortgages for owner-occupied properties in Massachusetts issued between 2007 and 2017.
More than one-quarter of the state’s Black buyers purchased in Boston in 2007. In 2017, Boston accounted for just 11 percent of homes purchased by Black residents. This 16-percentage-point drop in Black buyers purchasing in Boston was almost entirely matched by a 15-percentage-point increase in Gateway City purchases; 53 percent of Black buyers bought in Gateway Cities in 2017 up from 38 percent in 2007.
The share of Massachusetts’ Latino buyers purchasing homes in Boston declined from 11 percent in 2007 to only 4 percent in 2017. For Latino households, the 12-percentage-point increase in Gateway City purchases (from 48 percent in 2007 to 60 percent in 2017) surpassed the 7 percentage-point decline in Boston.
Researchers say they are concerned many of these buyers will be unable to gain wealth through these purchases. Using Census Bureau data, the researchers found that 1 in 4 Black buyers and 30 percent of Latino buyers bought homes in areas they classified as “vulnerable to decline” in home values. Within Gateway Cities, Black and Latino buyers were twice as likely as white Gateway City buyers to purchase in neighborhoods the researchers deemed “at-risk.”
“Economic stress from the COVID-19 pandemic presents an especially large problem for the vulnerable neighborhoods where Black and Latino residents have been buying,” report co-author and MassINC research director Ben Forman said in a statement. “Neighborhood conditions are critical to social and economic well-being broadly and, in particular, to the prospects for home price appreciation and wealth building through homeownership.”
MassINC also found that significant racial and ethnic disparities in mortgage origination rates remain. In 2017, mortgage originations per 1,000 residents climbed to 7.1 for Latino households, up significantly from 5.9 per 1,000 in 2007. Over this same period, mortgage originations to Black households only inched upward from 6.4 to 6.7, while origination rates for White borrowers grew from 9.4 to 10.5 per 1,000. In percentage terms, the gap between White and Latino rates fell from about 60 percent in 2007 to 50 percent in 2017. The White-Black disparity moved in the opposite direction, rising from 47 percent to 57 percent.
“Not all residents in Massachusetts have been able to purchase homes in stable neighborhoods where they can build equity and pass it on to the next generation. With each real estate cycle, the problem seems to metastasize. This time we need to get ahead of it with tools to protect vulnerable neighborhoods from entering downward spirals,” Forman said.
