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NAR: Minorities and Student-Debt Buyers Face Equity Challenge

Study: Less expensive homes build less equity, and NAR found that lower-equity scenario among Blacks (10.6% less), Hispanics (11.2%) and student-debtors (18.8%).

WASHINGTON – Minorities and student debt holders purchased lower-priced homes compared to white Americans and buyers without student debt, according to research conducted by Jessica Lautz, NAR vice president of demographics and behavioral insights, and Michael White, Nottingham Trent University professor and director of the Centre of the Built Environment.

Lautz and White’s Mind The Gap working paper examines purchase-price differences among homebuyers from January 2014 to December 2017. It looked at people who purchased a primary residence property, and how the purchase price they paid can lead to further wealth gaps through equity in homeownership.

Over that timeframe, Hispanic and Black Americans purchased homes 11.2% and 10.6% less expensive, respectively, than white Americans when controlling for household income, home size, location and down payment help from family.

Buyers who had student debt purchased homes that were 18.8% less expensive than those without student debt.

For many Americans, homeownership is an accidental savings plan in addition to a place to live. For many longtime homeowners, it’s their best way to build wealth. However, a lower initial investment in a small home can lead to lost wealth accumulation – and possibly lost homeownership – across generations.

The study’s authors suggested a number of policy steps that may help mitigate the homeownership gap, including financial literacy, refinancing student loans, expansion of mortgage financing though alternative credit scoring models, and expanding public awareness of low down payment programs.

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