For many years, I have been arguing that housing is not a fuel that can be used to drive the U.S. economy. Instead, it is a reflection of a healthy economy. And you cannot have a vibrant job market unless the basic economic foundation is solid.
I believe that my argument is affirmed in a new report issued by Zillow and the National Urban League, which found significant disparity in comparing homeownership rates between whites and nonwhites. To its credit, the report acknowledged the root of the problem is strictly economic: African Americans and Hispanics have a lower average income than whites and, thus, they are more likely to have lower credit scores.
The report was stark in measuring racial differences in the conventional mortgage market. “While blacks make up 12.1 percent of the U.S. population, they filed only 6 percent of all mortgage purchase applications in 2012,” the report stated. “Hispanics make up 17.3 percent of the population and filed 9.4 percent of the applications. In contrast, whites make up 63 percent of the U.S. population and filed 64.8 percent of purchase applications.”
Now, circle back to a report issued in May 2009 by the Pew Research Center, which analyzed the dramatic decline in minority homeownership during the recession. That report noted that homeownership gains for African Americans and Hispanics had nothing to do with a muscular economy and everything to do with loose lending standards and the proliferation of sloppily underwritten subprime loans.
The Pew report, however, failed to mention the role of political pandering from both parties in artificially inflating minority homeownership data without providing for the economic foundation needed to support this financial responsibility. (And lest we forget, homeownership is a responsibility that people earn.) Rather than create a foundation that would benefit all races and allow homeownership rates to rise organically as the result of economic strength, it was quicker and easier to enable reckless lending and encourage irresponsible borrowing as the strategy to inflate minority homeownership numbers. Not surprisingly, nonwhites were disproportionately impacted when the housing bubble burst.
Today, very few sane people can claim the U.S. economy is in good shape. This dreadful economic climate is especially cruel for African Americans – recent data from the Pew Research Center has found that the unemployment rate among African Americans is approximately double that among whites. And in 2011 – supposedly two years after the recession officially ended – 27.6% of African American households were living in poverty. That level is nearly triple the poverty rate for whites.
So what is the answer to this mess? Well, too much talk from the administration and its allies about “income inequality” seems to be centered on raising taxes on successful Americans. It is a silly idea, of course, which does nothing except demonize those who enjoyed a financial reward for their hard work. Even worse, the president’s talk about “income inequality” fails to mention that the situation became more pronounced since he moved into the White House.
If the administration is honest about encouraging minority homeownership, there needs to be a consideration of the bigger picture. Five years into the Obama presidency, the economy is still stagnant and there is no evidence that 2014 will be the year of the economic turnaround. If nonwhites are going to be equal partners with whites in homeownership rates as well as the wider economy, then a serious economic game plan is needed to make this a reality and to wipe out the lingering disparity between the races. Sadly, after five years, we’re still waiting for this plan to be put forward.
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