Monday, April 24, 2017

Update: A 15 Year Look Back at Portland Home Equity Growth and Minority and African American Home Ownership.

Whoops! in my earlier calculations, I neglected to add back into the total accumulated equity the equity that resulted from the reduction in loan principal over 15 years ($36,647 in my original study). When that is added the total accumulated equity climbs to $185,821, or 141% MORE than my most optimistic equity estimate in the original study. 

I have corrected the text below; my apologies for any confusion.

In 2001, while serving as Oregon HUD Field Office Director I did a study, The State of African American Homeownership in Oregon, 2000.  

In the study I pointed out the decline in African American home ownership, the absence of first time African American home ownership loans from Fannie Mae and Freddie Mac, and the key role that FHA loans played for minority homebuyers, including African American home buyers. 

That study is HERE. {I did a similar study on the State of Hispanic Homeownership in Oregon, but haven't been able to locate it online}. 

My Example Severely Understated 15 Year Home Equity Growth in Portland
In the introduction to the study I stressed the importance that homeownership had in increasing family assets. In my most optimistic example I projected that with a 2% annual appreciation the buyer of a Portland $135,000 sales price home would have $75,647 in total equity at the end of 15 years.

Boy, was I wrong!

I just took a look at the FHFA home index data for Portland for 3rd quarter 2001 vs 3rd quarter 2016.  (194.39 vs 409.19].

The index during that period increased by 110.5%, so a $135,000 home price in the 3rd quarter 2001 would have increased to $284,174 in the 3rd quarter of 2016,. That is  an increase of $149,174 from appreciation alone. When I add to that the reduction in loan principal over 15 years that is a total increase in equity of $185,821, 141% MORE than my most optimistic projection of $75,647.

Leaving Minority Families Even Farther Behind? 
Reported declines in rates of minority homeownership in the Portland metro area would mean that substantial numbers of minority households could NOT have realized these increases in family assets. [One example: Multnomah County ACS 2011-2015 data shows that the African American HO rate dropped to 29%, down from the 2000 Census rate of 38% that I reported in my 2001 study].

Sadly, this suggests that financial assets for many minority families may have fallen further behind families who were fortunate enough to buy homes in the early 2000's.  

Originally created and posted on the Oregon Housing Blog.

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