A new study conducted by the two economists of Federal Trade Commission (FTC) and published this December, suggested that higher home prices are good news for minorities since loosen up the tight standards in lending.
According to inman.com, the housing depression a few years ago was generally "depressing" but disastrous to the minorities. In 2004, the rate of household homeownership of African Americans climbed to a maximum of 49.4 percent but plummeted in 2015 to 41.9 percent, indicating a 7.5 percent decrease.
Moreover, the rate of household homeownership of Hispanic Americans peaked at 49.8 percent in 2006 but fell to 44.1 percent in the first quarter of 2015, showing a 5.7 percent decline.
Comparing the above stats to the rate of homeownership of the white non-Hispanic, the latter acquired its highest rate of 76 percent last 2004 but was down to 73.4 percent in 2013 after the housing market officially started to recover, indicating only a 2.6 percent decrease.
Normally, one would think that increasing prices are bad news for the minorities since it would only give them unaffordable housing prices. But a recently published study conducted by FTC economists Christopher H. Wheeler and Luke M. Olson contradicted this.
"Rising prices are good for minorities because they are accompanied by a loosening of lending standards," said the economists.
High prices change the way lenders evaluate the acceptable levels of risk and expected rates of return on assets relating to housing. Wheeler and Olson stated, "This variation may then translate into changes in the outcomes experienced by minority borrowers relative to non-minorities."
The two estimated the "relationship between annual metropolitan area-level house price inflation and the extent to which African American borrowers are denied mortgages compared to white borrowers" using the data gathered from 1990 to 2013 for the Home Mortgage Disclosure Act (HMDA).
They obtained a result that suggested that the variation in the conditional denial rates among whites and African Americans are now becoming smaller. Wheeler and Olson are convinced that there is a significant relationship between the rising house price inflation and the differences between the loan denials of Black and White applicants.
The study stopped last 2013 while the housing market was starting to recover. Nevertheless, a brief review of the data of the minority homeownership implies that the study is factual.
