AN new study analyzing more than 12 million home appraisals between 2015 and 2020 found racial and ethnic disparities in the United States.
Research shows that homeowners of color are twice as likely to have their homes undervalued than homeowners of white ethnicity.
Andre Perry, a Brookings Metropolitan Policy Program senior fellow, believes this to be a sign of racism in real estate. This is what stops black and Hispanic families accumulating wealth.
“When most people talk about structural racism and racism in general, they generally think of Klansmen in robes carrying torches… ABC News told.
Mortgage giant Freddie Mac’s report shows that 15.4% of appraisals in Latino neighborhoods and 12.5% in black neighborhoods are valued below the contract price of the property. In predominantly white areas, that number is 7.4%.
According to the study, underrated ratings increased as black and Hispanic communities grew.
Research was responsible for many factors that could contribute to a low home value, including the structure of the house and the characteristics of the area. However, Latino and black areas still received lower home valuations.
At the end of 2018, 85% of the appraisers were white nationally, according to the Taxation Institute.
“A valuation that falls below the agreed-upon sale price may allow a buyer to renegotiate with a seller, but it may also mean that families miss out on the full wealth-building benefits of homeownership or are unable to obtain the financing they need. It’s all about the American Dream.” Michael Bradley, Senior Vice President of Modeling, Econometrics, and Data Science at Freddie Mac’s Single Family division, said.
Generational wealth refers to assets that are passed from one generation onto the next. This could be stocks, real estate, investments and companies.
Perry believes that homeownership is the best way to build wealth. When their homes are less valued, families lose money. This can have a long-lasting effect on their families.
Perry stated, “If your equity is lower in your home, it means you have less resources to help yourself.” “Equity in people’s homes determines so much. It’s the money used to send their kids off to college and to start a business. The equity in the house is what most people use to start a business. It can be used to pay for a spouse or a death. It is important.
An average white family’s net worth is almost 10 times that of a typical black family, and eight times that for an average Latino family. In 2016, those totals were $171,000, $17,150 and $20,600, respectively, according to a Pew Research Center analysis.
A Brooking Institute report also: found that homes in predominantly black neighborhoods across the country are worth $48,000 less than predominantly white neighborhoods, resulting in a cumulative loss of approximately $156 billion in equity.
These ability gaps show how housing discrimination, as well as other forms of systemic racist behavior, can make it difficult for Latinos and Blacks to accumulate assets and invest in the future of their families.