MReport February 2019

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54 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST DATA THE LATEST Waking up From the American Dream How much money are homeowners of color losing in the housing market? H omeownership is central to the American Dream. However, it is hard for many from minority communities to achieve, according to a report by Brookings Institute entitled "The devaluation of assets in black neighborhoods," which addresses the cost of racial bias. The report found that owner- occupied homes in black neighbor- hoods are undervalued by $48,000 per home on average, amounting to $156 billion in cumulative losses. It stated that black communi- ties face major impediments to building wealth, commencing, and investing in business ventures as well as attaining a proper educa- tion, even today. Analyzing the devaluation of black homeownership, the report found that a majority of black neighborhoods hold $609 billion in owner-occupied housing assets comprising approximately 10,000 public schools and over three mil- lion businesses. However, homes in neighborhoods with a popula- tion 50 percent black people are valued at roughly half the price compared to homes in neighbor- hoods with no black residents. The analysis is restricted to 113 metropolitan areas with at least one majority black neighbor- hood. Comparing home values in majority black neighborhoods with those where less than 1 percent of residents are black, homes in majority black neighborhoods have greater appreciation values. The analysis notes that neigh- borhood quality is not the key rea- son for the devaluation of homes in black neighborhoods. Homes of similar quality in neighborhoods with similar amenities are worth 23 percent less ($48,000 per home on average, amounting to $156 bil- lion in cumulative losses) in major- ity black neighborhoods, compared to those with very few or no black residents. The metro areas surveyed revealed that 10 percent of neighbor- hoods are majority black, home to 41 percent of the black population living in metropolitan areas and 37 percent of the U.S. black population. Approximately 5 million non-black Americans live in majority black neighborhoods, the report indicated. This analysis confirmed the findings that there is a significant correlation between the devalua- tion of homes in black neighbor- hoods and the upward mobility of black children in metropoli- tan areas with majority black neighborhoods, from a statistical standpoint. According to the report, the me- dian home value in majority black neighborhoods is $52,578 while the estimated median home value in majority black neighborhoods, in absence of devaluation is $65,704. The dissimilarity index of the report stated that 57 percent of the white population would need to move to a different neighborhood for the white and black population to be distributed evenly. Remodeling and the Labor Market With construction labor low, maintenance and remodeling costs are suffering. S ingle-family housing authorizations, mainte- nance, and remodeling all decreased year-over- year in November, according to the BuildFax Housing Report. BuildFax states that this is the first time since 2011 to see a decrease in all three categories, and notes that it could point to a potential market slowdown. Single-family authorizations decreased by 0.86 percent year- over-year, while maintenance volume decreased by 5.85 percent and remodel volume decreased by 12 percent year-over-year. "More so now than in years prior, the compounding effects of natural disasters, scarcity in the construction labor market, and recent tariffs have impacted housing growth—not to mention systemic factors, like rising mort- gage rates, that influence consumer behavior," BuildFax COO Jonathan Kanarek said. "While it's natural to see some leveling off after steep growth, the next few months will be telling; whether a downturn is on the horizon or the market is simply softening is yet to be seen." In commercial construction, the BuildFax report found that construction has decreased along the same lines as residential. Despite the decrease, the report notes that commercial construc- tion spending has been on a steady increase over the past five years, though disproportionate increases between construction cost and volume points to a labor shortage. According to Fannie Mae, the labor market is projected to be one of the highlights of the economic growth and with inflation around Fed's 2 percent target, and Fannie Mae predicts that Fed will hike rates once more in December and two more times in 2019, despite rising market expectations of fewer hikes amid stock market volatility. Consumer spending is likely to be the largest positive contribu- tor that will drive growth and consumer confidence. Business fixed income, on the other hand, is expected to slow considerably by the third quarter and may also remain constrained due to higher tariffs, trade uncertainty, and rising interest rates and input costs. The existing trade tensions between the U.S. and China and stock market volatility is among the most notable risks to the fore- cast, Fannie Mae stated.

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