Top 100 Cities For Black Homebuyers

At a Glance

Nationwide, Black homebuyers are twice as likely to be denied a mortgage than their white counterparts. Additionally, Black people make up 13.7% of the U.S. population but account for only 8% of completed home purchases. However, some cities are making progress toward reducing these disparities.

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According to a Mortgage Research Center analysis, Black homebuyers experience a mortgage denial rate of 26.6%, double that of white buyers' 13.3% denial rate.

This is compounding the Black-white homeownership gap. According to the National Association of Realtors, 72% of white Americans own their homes versus 44% of Black Americans.

Yet some cities are making progress toward equality for Black homebuyers — via sheer numbers and relatively high mortgage approval rates.

While there’s still a long road ahead, 100 cities stand out as the most inclusive for Black buyers, according to a Mortgage Research Center methodology.

*The Inclusivity Score was calculated using four metrics important to Black homeownership: The number of successful purchases by Black homebuyers; total Black homebuyer mortgage applicants; Black purchase mortgage applicant approval rate; and Black and white mortgage approval rate spreads. The methodology seeks to rank the most inclusive cities for Black homebuyers.

Black Homebuyer Mortgage Approval Rates Lag Those of White Homebuyers in Nearly Every City

Black homebuyers were approved less often than their white counterparts in 94% of the 393 metropolitan statistical areas (MSAs) analyzed.

In the study's 10 top-ranking cities, Black homebuyer approval rates were still 8.9 percentage points lower than for white buyers. However, this was better than the 13-percentage-point gap nationwide.

Approval Rates by Race

Nationwide, the mortgage approval rate for Black homebuyers is 73.4% versus 86.7% for white buyers. Only Native Americans have lower approval rates. Asian buyers have the highest approval rate at 88.2%.

Cities With the Most Equitable Approval Rates

Some cities in our top 100 stood out as approving Black homebuyers at nearly the same rate as white buyers, with Lawton, Okla. leading the list with "just" a 3-point different between Black and white approval rates.

Cities Producing the Most Black Homebuyers

Because homeownership is crucial for wealth building in America, the ranking methodology considered cities that were creating the most Black homebuyers.

Ten cities account for about 36% of all completed home purchases by Black Americans nationwide. The remaining 64% are from the remaining 383 areas analyzed. Atlanta, Washington, D.C., and Dallas-Fort Worth alone created 15.6% of the country’s Black homebuyers from 2022 to 2023.

Many Challenges to Overcome

The homeownership gap between white and Black Americans has widened since 2012, says NAR. The trend will likely continue considering the approval rate differences observed in this study.

The statistics are disheartening, especially considering the stakes.

Owning a home is a key driver of household and generational wealth. According to the National Association of Home Builders, renters’ median net worth was $10,400 in 2022 compared to $396,000 for homeowners. And that wealth can be passed onto the next generation, creating a cycle.

To narrow homeownership gaps and create generational wealth for all, Black mortgage approval rates need to rise dramatically. It's a problem many are working on.

Nonprofit research organization Urban Institute created a five-point framework that would create more inventory, educate buyers, expand lending programs, reform zoning laws, and more.

Black Buyers' Challenges are Complex and Often Indirect

Odest Riley, CEO of WLM Financial, a real estate brokerage and lending firm in Inglewood, Calif., explains. "One of the biggest challenges I have encountered while working to get my clients approved for a loan is the debt-to-income ratio," he said. "Many African American clients are first-generation college graduates and face the unfortunate position of having taken out student loans in their name, which often creates a significant amount of debt when trying to qualify for a mortgage," Riley added.

Receiving help isn't usually an option. "Most African American buyers do not have the family dynamics to borrow or receive gifted down payment money," Riley said.

"Lower credit scores are a common issue," said Riley, "often resulting from historically not being given higher credit card limits, which would minimize the impact of card usage on credit scores. This leads African American buyers to have lower scores, which, in turn, leads to higher monthly payments, making it even harder to become a homeowner."

Discrimination plays a role as well, but covertly instead of overtly. In the past, banks would literally draw red lines on maps around certain neighborhoods and tell staff they could not lend there. "Even though banks claim not to be cherry-picking or profiling, if a neighborhood is predominantly Black and they choose not to work in that area, or give higher interest loans in that area, they are still redlining—just in a different way."

Hope for Black Homebuyers

Though Black buyers face challenges at nearly every turn, there are new and creative strategies emerging to turn Black renters into homebuyers.

"One of the biggest things I have been advocating for in my community is for people of color to buy homes and properties together, pooling resources, and refinancing in a few years to take out equity," said Riley, "This strategy helps both parties end up with their own homes. Group economics could help change this landscape significantly."

Down payment assistance can help, too. Most state, county, and city governments offer assistance programs for disadvantaged buyers. Additionally, non-profits, employers, and even lenders are alternative sources of down payment assistance.

Available nationwide, FHA loans offer a lenient alternative to stricter conventional financing. Some lenders approve loans with credit scores as low as 580 with 3.5% down. A 2023 HUD report noted that Black homebuyers with less than 5% down used an FHA loan 56% of the time, more than all other loan types combined.

There is some progress in the conventional loan market, too. Fannie Mae, an agency that creates lending rules for most conventional loans in the U.S., is working on expanding its credit scoring rules. It plans to incorporate VantageScore® in addition to the traditional FICO model. VantageScore claims its credit scoring is "fair and accurate across different demographic groups. The model is designed to be unbiased, providing consistent scores irrespective of race or ethnicity." Fannie Mae seems to agree with that assessment. "This update is part of Fannie Mae's ongoing commitment...to advance sustainable and equitable homeownership opportunities while promoting responsible and sound lending," said Malloy Evans, Fannie Mae's Executive Vice President and Head of Single-Family in a statement.

Despite progress, there's a long way to go. And some cities are leading the way. They produce tens of thousands of Black homeowners annually and make steps toward leveling the playing field.

Methodology

To determine the 2024 Top 100 Cities for Black Homebuyers, Mortgage Research Center analyzed 393 MSAs using over 31,000 data points spanning 2022 and 2023, the most recent data available. Cities were ranked based on the following metrics and weights:

• Number of successful purchases by Black homebuyers: 25%

• Total Black homebuyer mortgage applicants: 25%

• Black purchase mortgage applicant approval rate: 35%

• Difference between Black and white homebuyer approval rates: 15%

Approval rates were determined by comparing successful home loans (originations) plus approved applications that didn't turn into home loans divided by total applications.

The methodology seeks to rank cities that not only serve the most Black homebuyers, but also issue approvals at comparatively high rates. In this way, some cities with fewer Black homebuyers made the list, since these buyers were approved at higher rates than in other cities.

The study does not suggest that Black homebuyers can’t be or won’t be approved in some cities. Nor does it state that certain buyers have a better chance of getting approved based on location. Denying a mortgage application due to race is illegal in any area of the U.S., as is redlining. The study seeks to rank cities that appear to be making the most progress toward increasing Black homeownership.

Why not rank cities based on approval rates alone? Percentages can be deceiving. For instance, if only 10 Black homebuyers applied in a city and they were all approved, that would be a 100% approval rate. Many cities had less than 10 Black homebuyers in 2022 and 2023 combined. Giving weight to the sheer number of applications yields more reliable and fair results. Due to Atlanta's dominance in applicants and originations, a curve was calculated and added to the scores of all cities except Atlanta. This adjustment normalizes the data for the remaining cities to be fairly evaluated on the other variables without overly penalizing them for lower applicant or origination volumes due to population differences. Additionally, we removed cities from consideration if they had less than 300 home purchases by Black buyers in the past two years.

Data was sourced from the Consumer Financial Protection Bureau Home Mortgage Disclosure Act and analyzed by Mortgage Research Center. Data was compiled using the Polygon Research tool HMDAVision.