Black Families Priced Out Of Starter Homes In Most Major U.S. Cities

A new study finds that Black families can afford starter homes in only 10 of the 50 largest U.S. metropolitan areas, indicating persistent racial disparities in homeownership across the country.

The report, released by Redfin, found that typical Black households can afford starter homes in just one-fifth of major U.S. metros, based on the standard that families should spend no more than 30% of their income on monthly housing costs. In contrast, white families can afford starter homes in 32 metro areas.

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"Starter homes have become increasingly difficult for everyone to afford, with prices up 8% in the last year alone," Elijah de la Campa, a senior economist at Redfin, said in the report. "That has pushed buyers who earn more money to buy starter homes and pushed lower-income buyers out of the market altogether — and many of those lower-income buyers are Black."

According to the report, Detroit is the most affordable major metro area for Black families seeking starter homes, where they would spend about 16% of their earnings on housing costs for a median-priced starter home. St. Louis, Baltimore, Indianapolis, and Philadelphia rounded out the top five affordable metros for Black families.

On the other end of the spectrum, San Francisco stood out as the least affordable market. There, a Black family earning the local median income would need to spend 104% of their earnings on a starter home — effectively pricing them out of the market entirely. 

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The other least affordable markets for Black families were all in California: San Jose, Los Angeles, San Diego, and Anaheim.

The affordability gap is closely tied to income disparities. The estimated median income for Black households nationwide is $57,129, compared to $90,995 for white families. The income gap, combined with less generational wealth and a history of discriminatory practices in the housing market, contributes to the difficulties Black families face in purchasing homes, the report noted.

Nationwide, a Black family earning the median U.S. income would need to spend 41% of their earnings to afford the typical U.S. starter home, which costs $250,000 and comes with a monthly payment of $1,960 at current average mortgage rates. For comparison, a white family earning the median income would spend 26% on the same home.

The National Association of Realtors (NAR) reported last year that while overall U.S. homeownership had increased to 65.5% in 2021, the rate for Black Americans stood at just 44%, compared to 72.7% for white Americans. Despite modest gains in Black homeownership, the 29-percentage-point gap has widened since 2011.

Beyond affordability, Black mortgage applicants face higher denial rates — 20% compared to 11% for white applicants. Even those who secure financing often find themselves more cost-burdened, with nearly 30% of Black homeowners spending more than 30% of their income on housing costs, compared to 21% of white homeowners.

The Redfin report does note some positive trends, however. The share of U.S. mortgages taken out by Black homebuyers has recently increased, and the racial wage gap is narrowing. Still, the road to equitable homeownership remains long, with wide disparities persisting nationwide.

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