When I originally started down the path to write this piece, my general message was going to be “Black Homeownership Matters”, encouraging black people in my generation to keep the old traditionally American Dream alive for a couple different reasons:
- To help close the wealth gap between African Americans and White Americans. I wanted to provide evidence that home ownership can be leveraged as your greatest asset to make strides in other arenas in your life (student loans, business ventures, etc.).
- Possible benefit or asset to your children and generations to come.
- Land can provide a sense of security. The America we know now is changing with the electing of Donald Trump, purchase of land could provide a sense of security.
- The market is recovering and interest rates will increase with Trump as President and less regulation.
But, something happened while researching; I realized sending a message to our audience of "just buying a home alone was enough to help our community" is somewhat irresponsible. The truth, Black Homeownership does matter, but what matters more, SMART black homeownership.
Smart? Researched and well thought out home buying decisions. Smart means right place, right price, and right time. Let’s start with place. We’ve all heard the old saying in real estate, location, location, location; this saying applies and is more important for us than any other race or community. According to a study conducted by researchers at John Hopkins, “blacks who purchased their first home between 2003 and 2005 suffered a 23% loss in net worth. In the same period, the net worth of white first-time homebuyers jumped as much as 50%”. The study continues, “Between 2007 and 2009 -- the peak of the subprime mortgage crisis -- net worth for black first-time homebuyers decreased 43%, compared to 33% for whites”.
The reason for the decline in net worth? Mainly due to the housing crisis but another factor is depreciation of home values owned by specifically African Americans. Main determents of home prices are location, square footage, rooms and school district…Most minorities buy homes in minority communities, even those who can afford to move outside of minority communities. This for the most part hurt their investment because once a community has more than 10% African Americans home values begin to suffer…Majorly messed up I know. In almost every scenario where a home was purchased in 2000 in a majority African American community the home value has depreciated while the opposite can be said for a community with less than 10% African Americans.
The perception is Black people can’t maintain a property and their children hurt the school system and as a result the community hurts in the long run, more and more messed up I know. These are very old traditionally perceptions but many White Americans still hold these as truths in their mind, and they tend to get uncomfortable when too many black people live in their community.
My advice for picking the right place:
School systems are strong indicators of home values, and school system trend ratings are very strong indicators of future home values. Sacrificing a home with 5 bedrooms for a house with 4 bedrooms and a better school system maybe a sacrifice worth considering if you want to protect a home investment.
High Taxes aren’t always a bad thing, in my opinion if you can afford the high taxes is actually a good thing. It ensures the city is capable of maintaining its condition and keeps bad investors out.
Don’t overpay for a house in a minority community.
If you’re like me and living in a less diverse community doesn’t sit well with you, picking a house at the right price is imperative. But I just told you not to right? Yes and no, when possible I would pick a solid school district to live. When your other wants begin to trump your need to live in a white washed world to protect the value of your home (I touched on this in a past piece http://thetalented6.com/inspiration/2016/8/17/american-dream-deferred), buy at the right price.
My advice for picking the right price:
Take a serious look at bank owned, foreclosures, and sheriff sales. You can find some real gems in these arenas.
If you decide to renovate, do not renovate yourself out the market. Don’t renovate a house with mansion like qualities in a lower-middle class neighborhood. If you decide to sell one day it will be very difficult to get the return on investment you desire.
First Time home buyers, I would stay away from trendy areas or areas where the agent tries to sell you high on the fact the neighborhood is hot. This is a large risk and it can be a homerun or a strikeout on ROI. And if with your first home purchase you experience a strikeout it can feel devastating.
When is the right time? Well of course the general rule of sell high and buy low applies here. So the market right now is beginning to turnaround depending on your perception and your location. In some places the market never went low, but in general right now is a good time to buy a home especially because of the low interest rates.
My advice for the right time:
Have some reserves ready to maintain the property, don’t be the reason the value of your home falls. Be prepared to handle maintenance cost and upgrades as needed.
Don’t purchase a home if the mortgage is more than 25% to 30% of your income, so the right time is when you’re financially ready.
So before you purchase your home because Black Homeownership Does Matter be sure you make a well researched and educated decision, focus on what you really want, location, price, and time. Also be ready to potentially make a calculated sacrifice somewhere in order to protect the value of your investment. And if you’re in Cleveland, I'm a licensed Realtor so I can help too.
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