Association for Public Policy Analysis & Management

Homebuying by African-American households in the United States dropped sharply after the end of the housing bubble and the onset of the foreclosure crisis, but has recovered strongly in the years since 2014. As black homebuyers have returned in large numbers to the homebuying market, however, there is compelling evidence that their spatial preferences have shifted sharply, with significant implications for central cities and in particular for traditional homeownership-oriented African-American neighborhoods. We studied HMDA home purchase mortgages for 2005-2007 and 2015-2017 in central cities and surrounding suburban counties for a cluster of 15 older cities with central city populations over 200,000, central city black population share over 20%, and median metropolitan area house prices at or below four times the national median household income, in order to exclude metros with high cost barriers to suburban homebuying. We looked at spatial preferences of black home purchase borrowers, overall and by income and gender of borrower, by central city and suburban location, and by census tract within central cities. We found that by comparison to the earlier period, black homebuyers are significantly more likely today to be buying homes in suburban rather than central city locations; that they are significantly less likely to buy in predominately African-American rather than racially mixed census tracts within central cities; and that both preference patterns are strongly positively associated with higher borrower incomes. Although these generalized patterns were seen consistently throughout all of the cities and metros studied, the magnitude of the shift in spatial preferences varied widely from city to city, suggesting the presence of important local factors affecting homebuying choices.

These preference shifts have particular implications for the large number of predominately African-American middle-income neighborhoods, which were numerous in older central cities between the 1970s and the end of the millennium. Building on previous research that has documented the significant decline in socio-economic and housing market conditions in large numbers of those neighborhoods since 2000, we suggest that these preference shifts, while arguably reflecting economically rational decisions by homebuyers, represent an existential threat to what stability remains in black middle-income urban neighborhoods. To succeed, any effort by public agencies or community development corporations to stabilize or revive these neighborhoods will have to address the reasons for their loss of homebuyers, and frame strategies that will make them competitive with available alternative choices.