• From the peak of the housing boom to the depths of the recession, home values in the country’s predominantly black and Hispanic communities fell farther than in white and Asian communities.
• Current home values in black and Hispanic communities nationwide also lag farther behind their pre-recession peaks than white and Asian communities.
• These national trends can be attributed to local and regional demographic and economic dynamics unique to certain markets.

We’ve known for a while that nationally, the experiences of white, Asian, black and Hispanic homeowners are fundamentally different, and largely much worse for the latter two groups in particular.

But real estate is nothing if not local, and examining home value trends by race at the metro level illustrates the unique regional dynamics that together help paint the national picture.

Nationally, home values in predominantly black and Hispanic communities during the bubble years rose more quickly than other communities over the same time. And the higher these values rose, the harder they fell. From the top of the market to the bottom, home values in Hispanic communities – generally lower-income areas more likely to be located in the famously extreme bubble markets of Inland-Southern California, Arizona and Nevada – dropped a whopping 46.3 percent. In black communities nationwide, driven largely by dynamics in hard-hit, urban, lower-income areas in places like Atlanta, Los Angeles and Chicago, the ultimate decline was 32.1 percent.

Home values in white and Asian communities nationwide fell only 23.6 and 19.2 percent, respectively.

Having been hit harder, black and Hispanic communities are also lagging farther behind in their recovery. Home values in the country’s largely Asian communities, concentrated in strong housing markets like San Francisco and New York City, currently exceed their previous peak by 9.6 percent. In areas where whites are the largest group – covering much of the national landscape – home values are 8.2 percent below peak values.

In black and Hispanic communities, home values remain 17.9 and 24.2 percent below their pre-crisis peak levels.

The national differences in housing market performance in areas dominated by certain races is very much driven by where different groups are located geographically. Locally, for the most part, the story changes only in the details, but the meat remains: Predominantly black and Hispanic communities are farther behind Asian and white communities.

A Tale of Two Cities

Consider two examples.

Los Angeles is a diverse metropolitan area with a large Hispanic population: 45 percent of the total population is Hispanic (compared to 17 percent nationwide). In the L.A. area, home values have moved almost identically in predominantly black and Hispanic communities. Home values in both communities fell 44 percent from peak to trough and remain 20 percent below peak levels as of December 2014.

In L.A.’s white and Asian communities, home values fell 26 percent and 23.6 percent, respectively, and are currently 1.5 percent above prior peaks in Asian communities and just 1.6 percent below peak in white neighborhoods.

In Atlanta, where 32.3 percent of the total population is black (compared to 12.3 percent nationally), home values in predominantly black communities have performed most poorly. After dropping 51.2 percent from peak to trough, home values in Atlanta’s largely black communities remain 33.7 percent below peak levels. In white communities in and around Atlanta, home values fell only 22.3 percent and have almost recovered to their peak levels, remaining just 1.7 percent below peak as of the end of 2014.

There’s Something Happening Here. What it is Ain’t Exactly Clear

So, what’s happening here? The United States still struggles with racial and ethnic disparities on many important economic fronts, including education, employment, income, assets, access to consumer debt and home values. All of these factors have contributed to and help explain why home values in minority black and Hispanic communities, in particular, lag behind the nation as a whole.

Some of the reasons for the more severe housing boom and bust in black and Hispanic communities are clearly the legacy of broader historical, societal and economic barriers to success. Differences in incomes, for example – which reflect a wide range of factors including employment, assets and economic resiliency in the face of macro shocks – are particularly illustrative.[1]

On the whole, black and Hispanic households have lower median incomes than white households. Nationally, median white household income is $58,000. The median Hispanic or black household makes $42,000 and $35,000, respectively. Once the recession hit and unemployment rose, lower-income communities – unlike wealthier areas – could not turn to savings or social networks to help cover mortgage payments. Foreclosures ensued, driving down home values in a race to the bottom.

However, other reasons for more volatile home value performance in black and Hispanic communities were unique to the most recent boom and bust. In the years leading up to the crash, construction of lower-tier homes – the homes most accessible to lower-income borrowers – focused heavily on suburban and exurban communities far-removed from city centers. These were hit harder and struggled more to recover from what was arguably the worst and most widespread housing bust of all time. Additionally, in some cases, lower-income, less-educated communities experienced more of the excess and predatory lending practices that led to the bubble in the first place, a trend better explored in a number of important studies.[2]

A wealth of analysis and pubic reflection has attempted to unravel the complex and interrelated reasons why black and Hispanic communities suffered so dramatically during the housing bust, and why these communities continue to struggle. The data raise uncomfortable, yet unavoidable, questions.

There are no simple answers, let alone easy remedies.

Methodology

Zillow examined median home values within ZIP codes where the given group holds the plurality – representing a larger share of the total population than any other group – to estimate the path of home values within racial or ethnic communities over time. The national median home value associated with a given group in a given month is then the weighted average of these ZIP code-level medians, where the weights used are the number of racial/ethnic group members in the ZIP codes. This way, when analyzing home values over time in black communities, for example, only ZIP codes with a strong black presence are considered and the largest weight is given to the ZIP code with the greatest black population.

The map below illustrates the spatial patterns of racial/ethnic pluralities. Here we can easily see that the national home value patterns by race and/or ethnicity are driven by regional patterns in the U.S. housing market. Diving into individual metros, we continue to see clustering along racial and/or ethnic lines.

[1] Gerardi, K. & Willen, P. (2009). Subprime Mortgages, Foreclosures and Urban Neighborhoods. The B.E. Journal of Economic Analysis & Policy, 9(3).

[2] US Department of Housing and Development. (2000). Unequal Burden: Income and Racial Disparities in SubPrime Lending in America. Washington, DC: Department of Housing and Urban Development.  And, Apgar, W. C. (2012). Getting on the Right Track: Improving Low-Income and Minority Access to Mortgage Credit after the Housing Bust. Working paper. Cambridge, MA: Joint Center for Housing Studies, Harvard University.