Latest StreetEasy analysis shows minority groups in NYC struggle to access credit; Black applicants have the highest mortgage application denial rates in all five boroughs
NEW YORK, June 19, 2015 /PRNewswire/ —
- Black and Hispanic applicants are disproportionately denied conventional loans in New York City, with 33.6 percent and 29.2 percent of applications being denied, respectively, while 15.8 percent of white applicants were denied.
- Hispanic people account for 28.9 percent of New York City’s population, but represent only 6.2 percent of conventional loan applications. Black people account for 22.4 percent of the population, but represent 5 percent of conventional loan applications.
- The homeownership rate in New York City is 32 percent, compared to 63.5 percent nationwide. The rate among Asian people is 41.6 percent; white people, 41.4 percent; black people, 26.5 percent; and Hispanic people, 16.1 percent.
Black and Hispanic people in New York City have a harder time securing a home loan than white and Asian people, according to an analysis by StreetEasy ® of racial composition among mortgage application and homeownership data across the five boroughs i. The study reveals the difficulty of financing a home in New York City, especially for racial and ethnic minorities who have lower median household incomes and face access-to-credit issues.
Black and Hispanic people in New York City are greatly underrepresented among applications for conventional home mortgages. Hispanic people account for 28.9 percent of New York City’s population, but represent only 6.2 percent of conventional loan applications. Black people account for 22.4 percent of the population, but represent 5 percent of conventional loan applications. Racial disparities among mortgage applicants are even more dramatic at the borough level. In the Bronx, Hispanic people make up 54.6 percent of the population, but account for just 25.4 percent of conventional loan applications. In Brooklyn, 31.3 percent of the population is black, but black people account for just 7.4 percent of loan applications there.
While black and Hispanic people account for the fewest loan applications in New York City overall, they are denied conventional loans at higher rates than white and Asian people. Citywide, 33.6 percent of conventional loan applications from black applicants and 29.2 percent of applications from Hispanic applicants are rejected. White applicants have the lowest denial rate at 15.8 percent, followed by Asians at 18.5 percent (Figure 1).
“For many Americans, owning a home is an integral part of the American Dream. But in New York City where just one-third of residents are homeowners compared to roughly two-thirds in the United States, the dream of homeownership looks remarkably different,” said StreetEasy data scientist Alan Lightfeldt. “The city’s home prices often make ownership prohibitively expensive, keeping residents as renters by necessity, rather than choice. But, race and ethnicity can also alter the path to homeownership here. At each step in the mortgage process, from the initial application to final approval, the numbers point to a progressively less diverse pool of New Yorkers who are successful in securing the financing they need to own a home.”
The disparity in loan applications and approvals is tied to a number of factors, namely income and credit-worthiness. The median household salary for white households in New York City in 2013 was $62,000 and $58,000 for Asian households. By comparison, black and Hispanic households in New York City in 2013 earned a median income of $41,000 and $37,000 respectively ii. Naturally, these differences influence the amount of savings a borrower can afford to set aside for a down payment. Black and Hispanic applicants are also more likely to have limited or no credit history iii. Without a solid credit history or high enough income, applicants are often shut out of the conventional mortgage market entirely.
Denial rates among applications for Federal Housing Administration (FHA) loans iv, which offer more lenient qualification criteria, are less dramatic across racial groups. Citywide, 27.4 percent of all FHA loan applications were denied. Asian applicants had the highest denial rate (32 percent) followed by black (28.4 percent), Hispanic (26.8 percent) and white applicants (23 percent). Across the U.S., just 17.4 percent of all FHA loan applications are denied.
The full study with additional analysis and interactive graphics for each borough is available at streeteasy.com/blog/research.
StreetEasy is New York City’s leading local real estate marketplace on mobile and the Web, providing accurate and comprehensive for-sale and for-rent listings from hundreds of real estate brokerages throughout New York City and the major NYC metropolitan area. StreetEasy adds layers of proprietary data and useful search tools to help home shoppers and real estate professionals navigate the complex real estate markets within the five boroughs of New York City, as well as Northern New Jersey and the Hamptons.
Launched in 2006, StreetEasy is based in Manhattan’s Flatiron neighborhood. StreetEasy is owned and operated by Zillow Group (NASDAQ: Z).
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i StreetEasy examined 2013 data released under the Home Mortgage Disclosure Act (HMDA).
ii U.S. Census data, 2013
iii Consumer Financial Protection Bureau
iv An FHA loan is insured by the federal government and typically has more generous credit score and income standards than conventional loans. FHA loans also require a smaller down payment, sometimes as little as 3.5 percent, making it more accessible to individuals with lower incomes who may struggle to save for the advised 20 percent down.