The U.S. homeownership rate climbed to 65.5 percent in 2020, up 1.3 percent from 2019 and the largest annual increase on record. But although more Americans are likely to own a home now than during any year following the Great Recession (the homeownership rate was 65.4 percent in 2010); Black Americans continue to face significant obstacles along the path to homeownership. according to a new report from the National Association of Realtors (NAR).

The homeownership rate for Black Americans was 43.4 percent, vs. 44.2 percent in 2010. White Americans (72.1 percent), Asian Americans (61.7 percent) and Hispanic Americans (51.1 percent) all achieved decade-long highs in homeownership in 2020, with the rate for Hispanic Americans setting a record and reaching above 50 percent for the first time.

NAR’s report examined homeownership trends and challenges by race and location to explain current racial disparities in the housing market. Using data from the 2021 Profile of Home Buyers and Sellers, the report looked at the characteristics of who buys homes, why they purchase, what they purchase and the financial background for buyers based on race.

“As the gap in homeownership rates for Black and white Americans has widened, it is important to understand the unique challenges that minority home buyers face,” NAR Vice President of Demographics and Behavioral Insights Jessica Lautz said in a release.  “Housing affordability and low inventory has made it even more challenging for all buyers to enter into homeownership, but even more so for Black Americans.”

Housing affordability has eroded for many consumers since the start of the pandemic due to the combination of record-high home prices and record-low inventory. Since 2019, home prices have spiked 30 percent – or about $80,000 for a typical home, while housing inventory has declined to under one million units available for sale. Approximately half of all homes currently listed for sale (51 percent) are affordable to households with at least $100,000 income.

Nationwide, nearly half of all Asian households annually earn more than $100,000. However, 35 percent of White households, 25 percent of Hispanic households and only 20 percent of Black households have incomes greater than $100,000.

NAR’s analysis found the most affordable states for Black households to purchase a home are Maryland, West Virginia, Kansas, Ohio and Indiana. The least affordable states for Black households are Utah, Oregon, California, Nevada and Rhode Island.

In terms of renter households, half of Black Americans spend more than 30 percent of their monthly income on rent. Nationwide, NAR estimated 47 percent of white renter households and 36 percent of Black renter households can afford to buy a typical home when comparing the qualifying income to purchase a home and the median income of renter households.

“Black households not only spend a bigger portion of their income on rent, but they are also more likely to hold student debt and have higher balances,” Lautz added. “This makes it difficult for Black households to save for a down payment and as a result, they often use their 401(k) or retirement savings to enter homeownership.”

Black households (41 percent) are also more than twice as likely as Asian households (18 percent) and nearly twice as likely as White households (22 percent) to have student loan debt. Approximately a quarter of Hispanic households (26 percent) reported having student loan debt.

Meanwhile, Black Americans (14 percent) and Hispanic Americans (12 percent) were at least twice as likely than White Americans (6 percent) to tap into their 401(k) or pension funds as a down payment source for a home purchase.

The study noted that for those who said they witnessed or experienced discrimination in a real estate transaction, nearly a third of Black respondents (32 percent) said they faced stricter requirements because of their race. That compares with 19 percent of white respondents, 16 percent of Hispanic respondents and 4 percent of Asian respondents. Approximately one-third of Black and white home buyers (32 percent each) and almost a quarter of Hispanic home buyers (23 percent) said they witnessed or experienced discrimination with the type of loan product offered.