Jani Tillery thought she would be a homeowner by now.
Her parents bought a house in the Detroit suburbs in the late 1970s while living on a modest income. Her mother was a teacher. Her father worked in the automotive industry. They raised their children in the house and paid off the mortgage. They will probably live there in retirement and possibly pass the house — not only a home with rich sentimental value but also a sizable financial asset — on to their children.
Tillery, 42, hoped this would finally be the year she, too, could buy. She’s a lawyer at a nonprofit in Washington, and she recently got a promotion and raise.
Yet, she says, this part of the American Dream seems out of reach for her, as it is for many other African American workers despite notable strides in other aspects of their finances.
In many ways, African Americans have regained the ground lost during the financial crisis. Many are finding jobs and getting raises.
But the holy grail of homeownership remains elusive. Forty-three percent of blacks owned homes in 2017, according to an annual report from the Joint Center for Housing Studies of Harvard University. In contrast, 72 percent of whites did, a gap that has mostly widened during the past three decades.
“The overall frustration is, I am a working citizen. I pay my taxes. I’m doing a job to help kids,” said Tillery, whose nonprofit helps children with disabilities. “It’s better for me to own a home. I’m 42. I don’t want to continue renting.”
There aren’t many homes in the area that fall into her price range of $200,000 or less. When she sees a listing she can afford, she either loses out to a buyer who will pay more or waive contingencies or learns that the property isn’t approved for Federal Housing Administration mortgages, which she is relying on because they require lower down payments than conventional loans.
The housing market is recovering nearly a decade after the financial crisis. But a recent increase in the national homeownership rate — the first in more than a decade — has done little to close the stark gap between black and white households. Blacks have also had smaller gains in homeownership since the recession compared with whites, Hispanics and Asians.
The gap persists even as African Americans have experienced other major financial gains since the downturn. The unemployment rate for black workers dropped to 5.9 percent in May, hitting a record low. African Americans’ wages have risen as much as the average since 2008. But when it comes to homeownership, one of the pillars of building wealth, black households are worse off than they were 30 years ago.
“We haven’t made any progress in homeownership since the passage of the Fair Housing Act in 1968,” said Nikitra Bailey, an executive vice president with the Center for Responsible Lending, a nonprofit that researches abusive lending practices. “The little progress we did make has been wiped away by the foreclosure crisis.”
After finding steady jobs and rebuilding their credit after the recession, some African Americans are having a hard time saving for a down payment. Black workers are more likely than other racial groups to see their paychecks, which are already smaller than those of the average white worker, eaten up by student loan payments and growing rental bills, housing experts say. And when they do feel ready to buy a home, people of color often face higher fees that make the loans unaffordable.
Tillery said saving for a down payment has been difficult because of her nonprofit salary, rent that rises almost every year and her student loan payments. She imagines she would have much more saved if it weren’t for the minimum $400 a month going toward her student debt.
But she said she had to take out some loans to pay for her undergraduate degree, explaining that she had two sisters who attended college at about the same time.
Law school allowed her to move on from an administrative job in telecom. But the trade-off was that her student debt load ballooned into the six figures.
“I went to school because I wanted to become a lawyer, to make more money so I could have a better life for myself,” Tillery said.
Many black workers are dealing with the lingering effects of losing their homes to foreclosure during the financial crisis, an obstacle that affected African American and Latino borrowers more than white borrowers, Bailey said.
Black and Latino borrowers were disproportionally hit by foreclosures in the financial crisis, studies show. About 8 percent of African American and Latino homeowners lost their homes to foreclosure from 2007 to 2009, almost twice the rate of white homeowners, according to estimates from the Center for Responsible Lending.
African Americans were more likely to experience foreclosure because they were disproportionately targeted for “toxic” mortgage loans during the boom years of the housing market, Bailey said. That included adjustable-rate loans, which exposed borrowers to higher interest rates and larger mortgage payments after the first few years, she said.
Some lenders thought homeowners would refinance to bring those payments down, but that option disappeared when the housing market collapsed, Bailey said.
Darrius Woods, a housing lawyer in Atlanta, said he was motivated to become a homeowner by watching his father’s struggle. Woods and his family moved often when he was a child, bouncing from one apartment to the next in Atlanta.
His father was finally able to buy a home, but his experience with homeownership was brief. His father was unable to keep up with payments after he lost his job in the recession, Woods said.
Now Woods, 28, is about to have a home of his own. After a few months of searching and two rejected offers, he is under contract for a two-bedroom house in southwest Atlanta. He hopes the house, which is more than 30 years old but was recently renovated, will be a natural gathering place for his parents, siblings and large extended family. He also views it as an investment for the future.
“I’m thinking about just the opportunity to pass it on to someone,” he said. “Not only my current family, but my future family.”
After the downturn, banks and other lenders clamped down on credit, added more consumer protections and raised the qualifications for mortgages. Some consumer groups say the higher lending standards resulted in an overcorrection that made it especially difficult for people of color, who may have lower credit scores and modest down payments, to break into the market.
Many black borrowers find the loans they qualify for come with high fees that make them unaffordable, Bailey said. For example, some borrowers face loan level price adjustments, or additional fees based on credit scores or the size of a down payment.
Buyers providing down payments of less than 20 percent of the purchase price may also need to pay for private mortgage insurance, which increases their monthly costs. Together, the fees can add three percentage points to the interest charged over the life of the mortgage, making the loan too expensive for some would-be owners, Bailey said.
Homeownership is one of the main avenues Americans have for building wealth. A long-standing wealth gap between black and white households — the median net worth of white families is nearly 10 times that of black families, according to the Federal Reserve — makes it especially difficult for people of color to build up the savings needed to buy a home.
In turn, the lower homeownership rate among blacks makes it more difficult to close that wealth gap.
“How can blacks and Latinos have high down payments with a history of discrimination making it difficult for them to acquire any wealth?” asked James H. Carr, the lead co-author of an annual report on the state of black housing that is published by the National Association of Real Estate Brokers. Black workers who do not buy homes can also be left with fewer assets to live on in retirement or to pass along to the next generation, he said, contributing to an “intergenerational downward trajectory for wealth in our country.”
African Americans’ path to homeownership has been hindered by a long history of unfair housing policies that either banned black workers from owning property or restricted them to certain neighborhoods with lower property values, said Ralph McLaughlin, chief economist of Veritas Urbis Economics.
Access to mortgages has improved over the past few years as lenders and regulators have eased the requirements for down payments, debt levels and credit scores. The black homeownership rate increased 0.8 percentage points last year, according to the Harvard housing report.
However, many borrowers who are newly able to qualify for a mortgage are facing the least affordable housing market since 2008, said Daren Blomquist, senior vice president for ATTOM Data Solutions, a company that tracks real estate data.
The national median home price reached $245,000 in the second quarter of this year, up 75 percent from the lows at the beginning of 2012, according to a recent report by ATTOM Data Solutions. In comparison, average weekly wages have grown only 13 percent.
Those rising property values, combined with higher interest rates, increase the amount that borrowers need to save for a down payment, causing even more pain for those who had foreclosures, Blomquist said.
“Even if you don’t have that foreclosure on your credit history anymore, you haven’t been building up equity over the last seven years,” Blomquist said. “So that makes it more difficult to come up with the down payment on a home and therefore makes it more difficult to qualify.”
After a lull in her search, Tillery renewed her lease in June. But she still hopes to buy a house or condominium this year.
“I think there’s power in homeownership,” she said. Owning a home would mean a break from the uncertainty that comes from dealing with a landlord who might raise the rent or restrict how she can decorate, Tillery said. It would also mean a long-term investment that could give her more financial stability.
“In a way, it’s almost like all my hard work is in vain,” she said, “if financially, I am just throwing a good chunk of my paycheck away to rent year after year and have nothing to show for it.”