Jones, 48, planned to build capital by buying a home in the South Phoenix neighborhood where she grew up. Instead, she’s on the sidelines, facing skyrocketing rents and struggling to jump-start the process of finding a place of her own.
“It was very defeatist, very disheartening,” Jones said. “It’s the American dream. Once you buy a home, you feel fulfilled.”
The market values first-time home buyers from all walks of life, but black buyers face even greater hurdles.
Black applicants were denied home loans at a much higher rate than other groups, according to a Zillow analysis of Home Mortgage Disclosure Act data. Nearly 20% of black applicants were denied a mortgage in 2020, compared to 10% of white applicants. Credit history was the most common reason given to black applicants for rejection.
But few programs are currently in place to help Jones and other potential buyers struggling to afford a home.
This creates a huge hurdle in today’s housing market, where investors with cash offers are buying up more property than ever to rent or resell. Investors bought a record 18.4% of U.S. homes purchased in the final quarter of 2021, up from 12.6% a year earlier, according to a Redfin analysis of county records.
In Phoenix, investors are particularly active, buying 28.4% of properties in the same period.
Jones spent nearly a year trying to buy her first home there. She had started saving money and was approved for an FHA loan that would only require a 3.5% down payment. But with less than $6,000 set aside for a down payment, Jones couldn’t compete and eventually gave up looking.
“Every time I bid, every time I watched something, I was outbid, or someone had already taken it,” Jones said. “I just put it on the back burner, because I can’t afford what’s out there right now.”
Maisha Fair, Jones’ real estate agent, says many of her Phoenix clients face the same predicament.
“They can’t buy anymore. They’re stuck in the rental market,” Fair said. “And it hurts those who live here.”
Some experts expect these market conditions to widen the racial gap in homeownership.
Census data shows nearly 45% of black families own their homes, compared to 74% of white families. The gap has barely changed since the 1960s, when the Fair Housing Act banned housing discrimination.
“Unfortunately, the homeownership gap has actually widened,” said Jessica Lautz, vice president of demographics and behavioral insights at the National Association of Realtors. “The pandemic has exacerbated everything. When we look at inequity in homeownership, we find that black buyers have a harder time entering the home buying market because they have been hardest hit by the pandemic.”
“The homeownership gap is going to exacerbate the wealth gap,” said Andre Perry, senior fellow at the Brookings Institution. “When people don’t buy homes, it just makes it harder for future generations to buy homes…When we ignore wealth, we’re essentially burying our heads in the sand at discrimination and barriers. that prevent many people, even with high incomes, from buying a home.
Skyrocketing rents could widen the racial wealth gap even further and displace more people.
Rents in the United States hit a new record high in April and are expected to continue to rise. The national median rent was $1,827 per month, up 16.7% from a year ago, according to a report from Realtor.com.
“The market is definitely accelerating gentrification,” Perry said. “What that really means is that people are going to be pushed out to low-wealth, low-resource suburbs. People are going to be further away from their jobs and families will be struggling.
In Phoenix, real estate agent Maisha Fair says investors aren’t just buying properties — they’re driving up rental prices so high that families are being forced to move.
“They can no longer live in a neighborhood where they know their neighbors,” Fair said. “The same investors who came in and bought these houses with cash are now renting to the same people who wanted to buy the house,” Fair said.
Jones’ rent in Phoenix has gone up $400 a month. She burned through the $6,000 she had set aside for a down payment after losing her job for a few months. Now, she’s much more focused on making ends meet than on achieving her dream of home ownership.
“It’s money…I can’t even afford to live there,” Jones said. “So yeah, it’s heartbreaking.”