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Rising mortgage rates and lingering inflation are forcing many Americans to put plans to buy a home on hold. That is pushing up rent prices for others. As economics correspondent Paul Solman explains, no one has experienced that more acutely over the last year than people of color. It’s part of our ongoing series, “Race Matters.”
Amna Nawaz:
Rising mortgage rates and lingering inflation are forcing many Americans to put plans to buy a home on hold. That, in turn, is pushing up rent prices for others.
And no one has experienced that more — more acutely, rather, over the last year than people of color, as economics correspondent Paul Solman explains.
It’s part of our series Race Matters.
(MUSIC)
Paul Solman:
After a lifetime of performing the world over, Lily Adams, 74, is back in her hometown, one of more than 59 million Americans, 18 percent of us, living with family, her daughter and son-in-law, in suburban Detroit.
But she needs her own place, and it better be a house.
Lily Adams, Michigan:
I can’t, like, stay in an apartment, because I make noise, you know? I have to play.
Paul Solman:
If you have an apartment, you will be making too much noise for the neighbors? Is that it?
Lily Adams:
I need a place like this place, if possible. And I probably would teach, go back to doing some teaching too. And nobody wants to hear that.
Paul Solman:
Adams says she can afford a $100,000 home in the up-until-recently bargain-basement Detroit market.
Lily Adams:
There are houses to be found. The problem is finding the financing for these houses.
Paul Solman:
That’s because of spiking mortgage rates, which have doubled in a year.
Lily Adams:
They started incrementally going up, up, up, until it reached a tipping point, and making it just impossible.
Paul Solman:
Enough money for a fat down payment, of course, and rates wouldn’t matter so much. But Black Americans like Adams were actively prevented for decades from building home equity, the bulk of the wealth base for most other middle-income Americans.
Raheem Hanifa, Harvard Joint Center For Housing Studies:
From the 1930s to the ’60s, the federal government embarked in redlining, which was a racially explicit housing policy that provided home loans to white families and denied those same loans to Black families.
Paul Solman:
Thus, says housing researcher Raheem Hanifa, a Detroiter himself, Blacks have too little equity to cash in for a down payment. And now, suddenly, the mortgage rate spike.
Raheem Hanifa:
You will see that there’s been a decline of 52 percent in home affordability for Black households.
Paul Solman:
Even in bargain-basement 77 percent Black Detroit?
Raheem Hanifa:
Detroit is one of those cities that is no longer affordable to low-income families.
Paul Solman:
Like the family of post office employee Angela Smith, renting the last four years. She needs to only put down 3.5 percent because of a government program. But she explains:
Angela Smith, Wisconsin:
You try to stay on top of the bills that you already have, and then you’re trying to save money to buy a house, do you not eat? Do you not pay your rent? Then gas went up to $5. So, what do you do? You not put gas in your car to go to work?
Paul Solman:
The interest rate surge is killing her budget already. What’s more, Smith needs that car just to get to her job.
Angela Smith:
And the interest rate on that car that is terrible. It’s like 19.49 percent I’m paying on that car. I’m paying a $659 a month for this car.
Paul Solman:
Mortgage rates are crushing folks like Smith. The best offer we could find online for a $100,000 house, her 640 credit score, a 15-year mortgage with a 6.3 percent interest rate, $788 a month, on a salary of less than $40,000 a year, before taxes, union dues, et cetera.
But, of course, it’s not just for homeowners of color that mortgage rates are discouraging.
Samantha Moceri, for instance.
Samantha Moceri, Michigan:
We have set a budget. And now with interest rates every few weeks to a month or so going up, and us not finding a home every few weeks to a month, it makes us want to stay where were at and not get in the rat race.
Ed Butler, Good Company Realty:
I’m Ed Butler. If you’re new to the channel, I make videos about living, working, sleeping, eating, and playing in Detroit.
Paul Solman:
Local real estate agent Ed Butler takes to YouTube to help buyers navigate the Detroit market. But with the new mortgage rates, says Butler:
Ed Butler:
For buyers who are shopping in a certain price range, they no longer can afford their payments. So they’re deciding to either rent or just stop their search at all.
Paul Solman:
Ah, deciding to rent, that’s the less told story of higher mortgage rates. Nationwide, the median rent is up 24 percent in the past year to about $1,900, a record high for the 16th straight month.
Peter Hepburn, Princeton Eviction Lab:
With interest rates going up so dramatically, there are fewer people looking to get a mortgage and more people who are currently renters ending up staying renters.
Paul Solman:
Peter Hepburn of the Princeton Eviction Lab.
Peter Hepburn:
And that means competition for a limited set of rental housing.
Paul Solman:
And this is an added problem for those just getting by, in an era where, increasingly, landlords are investors.
Peter Hepburn:
The share of new purchases for rental housing that are coming from investors has been increasing steadily over the last decade.
Paul Solman:
The problem is, those investors have few qualms about raising rents, and thus more evictions.
And evictions are picking up in Detroit, including among smaller landlords, like the one this tenants group has organized to resist.
David Chavarria, Renter:
I’m being evicted for a late payment in April.
Paul Solman:
Thirty-two-year-old David Chavarria is a sanitation worker in Detroit’s sewage industry. He paid his rent, but:
David Chavarria:
Basically, what their lawyer said was now I’m causing a ruckus in the building.
Paul Solman:
Well, are you causing a ruckus?
David Chavarria:
Yes. We were resisting rent raises based off of the condition of the building. The elevator was out for eight months. And for us that live on the fourth floor, that is pretty, pretty significant.
Paul Solman:
The fact is, says Chavarria:
David Chavarria:
A lot of people on our street can’t afford to pay the increases in rent.
Paul Solman:
But because of the hot rental market, others can; 71-year-old Lewis Bass, a retired chef, has lived here for 15 years, but, recently, new management took over.
So they’re just trying to force you out?
M. Lewis Bass, Renter:
We are being forced out to be replaced by somebody who’s willing to come in and tolerate the conditions as they are.
Peter Hepburn:
Fewer people going on to buy their homes means people staying renters, means more competition for limited apartments.
Paul Solman:
Even in iffy conditions.
The new management’s response? “Inflation is killing everybody right now, so you have to continue to raise rents on a regular basis. Otherwise, you wither and die.”
The landlord says he fixed the elevator and insists that the only evictions are for nonpayment of rent.
Meanwhile, in recent weeks, as interest rates continued to climb, housing prices have finally stopped rising.
Ed Butler:
In the market, we’ve started to see a lot more price decreases and price drops than we have in the last few years. So, naturally, that average price point is going to either stabilize or pull back.
Paul Solman:
Again, Detroit realtor Ed Butler.
Ed Butler:
The rest of the country is kind of experiencing a slight cool-off. Us, we’re doing it a lot, because we have a little bit more inventory than the rest of the country does.
Paul Solman:
So, good for buyers like Samantha Moceri?
Samantha Moceri:
We go to see these houses and we’re finally crunching numbers and saying, OK, we want to do this, we want to do that, we like this house, yadda, yadda, yadda.
Then you get to the point where your interest rate is now 2 and 3 percent higher than what were currently paying. So, is it really going down or is it just kind of shifting over? So who are we paying more to, the seller or the mortgage company?
Paul Solman:
Though, I guess if you buy now and mortgage rates eventually go down, you could refinance at a lower rate.
So might not that give hope to those like Lily Adams?
Do you think you’ll be able to buy a place?
Lily Adams:
Yes, eventually. Yes, I believe so.
Paul Solman:
How so? Is it just because you’re that kind of person?
Lily Adams:
I’m that kind of person.
Paul Solman:
Let’s wish her luck.
For the “PBS NewsHour,” Paul Solman, enjoying my first interview concert, as I hope you are.
(MUSIC)
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Paul Solman has been a business, economics and occasional art correspondent for the PBS NewsHour since 1985.
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