The Black neighborhood home appraisal gap is real. Can we close it?

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Jeff Ostrowski | (TNS) Bankrate.com

For middle-class Americans, homeownership is a key component of their family’s net worth. But many Black and Latino Americans find themselves on the outside looking in. Their homeownership rates are significantly lower, and they often find their properties are consistently less valuable than comparable ones in White neighborhoods.

This racial gap in home appraisals is a real phenomenon, one that sabotages the wealth-building power of homeownership in Black and Latino neighborhoods, according to a significant body of research. Among the largest studies of late is mortgage giant Freddie Mac’s analysis of 12 million transactions, showing that appraised values are more likely to fall short of the purchase price for homes in census tracts with a higher share of Black and Latino households.

The appraisal gap matters because it creates a barrier for Black and Latino homeowners hoping to sell their property for a profit, and for buyers seeking financing for a purchase. What’s more, it has a lasting impact on the overall net worth of these consumers — the ramifications of which can extend through generations.

However, there are glimmers of good news: The racial gap in appraisals has narrowed in nearly every state in recent years, according to a Federal Housing Finance Agency (FHFA) review published in April.

Minority group homeownership data and statistics

—In mostly Black census tracts, 12.5% of homes appraised at a value below the sale price, compared to just 7.4% of homes in predominantly White areas, Freddie Mac reports.

—In predominantly Latino neighborhoods, fully 15.4% of homes for sale were appraised at below the sale price, per Freddie Mac.

—The Black homeownership rate in the first quarter of 2024 was 45.7%, compared to 74% for White Americans, according to the U.S. Census Bureau.

—The Hispanic homeownership rate in Q1 2024 was 49.9%, the Census Bureau reports.

—Homes in Black neighborhoods are valued at 21% to 23% below what their valuations would be in non-Black neighborhoods, the Brookings Institution reports.

—Homes in majority-Black neighborhoods are 1.9 times more likely to be appraised under the contract price than homes in majority-White neighborhoods, Brookings says.

—The median appraised home value is 15% lower in mostly Black neighborhoods compared to homes in neighborhoods where less than 1% of the population is Black, Brookings estimates.

A measurable racial gap

Anecdotal evidence about racial disparities in home valuations has existed for years. But Freddie Mac’s study, an examination of 12 million appraisals ordered for home-purchase transactions from 2015 to 2020, added some hard data points to claims that appraisers might, consciously or subconsciously, undervalue homes in non-White neighborhoods. Valuing a home is an imprecise science, of course, so Freddie compared appraised values to the “contract price” — that is, the amount that buyers had agreed to pay.

Its analysis found that homes in mostly Black and Latino census tracts were assigned appraised values lower than the contract price more frequently than homes in White tracts. While 12.5% of homes in mostly Black areas were appraised for less than the contract price, just 7.4% of homes in mostly White tracts experienced appraisal shortfalls. What’s more, as the concentration of Black or Latino residents in census tracts increases, the appraisal gap increases, Freddie Mac found.

And the culprit doesn’t seem to be a small number of unenlightened appraisers. A large portion of the professionals who completed appraisals in both minority and non-minority areas generated statistically significant gaps, Freddie Mac notes.

Housing industry takes aim at appraisal gap

The Appraisal Institute lauded Freddie Mac for exploring the issue of bias in home valuations. “Unconscious bias is real and exists in all industries,” the trade group said in a statement. “Appraisal is one piece of a larger ecosystem, and appraisal groups are working alongside consumer groups, real estate brokers and agents, banks, government agencies, think tanks and others to explore where housing inequities may stem from and what combination of solutions should be considered.”

Though it lent considerable credence to the issue, Freddie Mac’s report was not the first. A 2018 study by the Brookings Institution, the nonprofit think tank, found that Black-owned homes are undervalued by $48,000 on average. A follow-up Brookings study in December 2022 unearthed more details, zeroing in on appraisals. It found that homes in Black neighborhoods to be valued at 21% to 23% below the levels the valuations would be in non-Black neighborhoods.

Brookings also found that homes in majority-Black neighborhoods are 1.9 times more likely to be appraised under the contract price than homes in majority-White neighborhoods. And the median appraised value is an estimated 15% lower in mostly Black neighborhoods compared to homes in neighborhoods where less than 1% of the population is Black.

The mortgage and appraisal industry is acknowledging the issue. Banking giant JP Morgan Chase pledged a $3 million donation to the Appraiser Diversity Initiative, a collaboration between the Appraisal Institute, the National Urban League, Fannie Mae and Freddie Mac. The megabank said its goal is “to root out bias in the residential appraisal process.”

How does the appraisal gap affect minority groups?

Appraisals are just one piece of a stubborn racial divide in the U.S. housing market. Black Americans (especially Black women) have less wealth overall, and therefore are less likely to own homes. When they do purchase, they find themselves more likely to pay higher interest rates on their mortgages.

Black homeowners often struggle to build long-term wealth because their properties are undervalued — and there’s no straightforward easy way to dispute an appraisal or have it changed.

The worth of a home directly impacts personal wealth overall: Black and Brown groups often are less wealthy because their homes, a key asset, are deemed less valuable. But the appraisal gap’s cause-and-effect dynamics is a classic chicken-and-egg question. Are homes in Black and Brown neighborhoods undervalued because their owners and those areas are in fact poorer and less prosperous? Or are African- Americans and Latinos hindered from financial prosperity because their homes are undervalued? Or is it a mix of both?

Appraisal gap is the tip of a bigger iceberg of disparity

Whatever the answer, it’s clear that minority groups lag White Americans by a variety of financial yardsticks. In one measure of the steep U.S. wealth gap, the Federal Reserve reports that as of the first quarter of 2024, White Americans owned assets worth $141.5 trillion. Black Americans had $6.7 trillion in assets, while Hispanics held $4.54 trillion.

In another illustration of the divide, data from the Federal Reserve Bank of St. Louis says White households had an average net worth of $1.28 million, compared to $310,000 for Black households and $242,000 for Latino households (as of 2023).

Employment rates are another dreary statistic. Unemployment for Black Americans is routinely much higher than for White Americans. In May 2024, the jobless rate for African Americans was 6.1%, compared to just 3.5% for White workers, according to the U.S. Labor Department. That of course impacts the ability to save and invest, as well as to accrue measurable earnings for Social Security benefits.

All these financial headwinds turn into a self-perpetuating cycle. Less wealth means fewer resources available for college and higher education (minority students tend to carry bigger student loan balances) and for health care (the average lifespan for Black Americans is nearly five years less than for White Americans, the Centers for Disease Control reports). A smaller net worth ripples through the financial lives of minority groups, hampering their ability to save for retirement, launch businesses and make investments. And, ultimately, to pass money on to heirs — perpetuating a generational wealth gap.

Good news on the racial gap front?

Some evidence exists that the appraisal gap may actually be narrowing. In an April 2024 study of home valuations for conventional loan applications, the FHFA compared appraisals between Q1 2013–Q2 2021 and then Q2 2022–Q4 2023. During the two periods, “property valuation inequalities” between homes in majority-Black and majority-White neighborhoods declined from 6% to 3.8%, while the gap between Hispanic and White areas declined from 8.3 to 5.1 percentage points. The declines occurred in nearly all U.S. states.

The agency, which oversees mortgage giants Fannie Mae and Freddie Mac, credited the effect of a federal task force started in 2021 that “increased awareness of racial bias in home valuations” for states and other governments.

Other public efforts may be paying off as well. In 2021, the U.S. Department of Justice launched an initiative to combat redlining, a discriminatory practice that includes biased appraisals (see FAQ, below). As of autumn 2023, the Combating Redlining Initiative had secured over $100 million in relief for communities of color nationwide that have experienced discrimination from mortgage lenders.

FAQ

—What happens if a home appraisal is lower than the buyer’s offer?

The buyer is in a tough spot, officially known as an appraisal gap. Say a buyer has made an accepted offer and signed a purchase and sale agreement to pay $300,000 for a home. But then the buyer’s mortgage lender appraises the home for only $270,000. Since the lender won’t finance more than the appraised value, the buyer is now short of funds to purchase the home. There are typically three options: The seller can reduce the home’s price to match the appraisal value. The buyer can agree to come up with a larger down payment and accept a smaller mortgage. Or the deal might fall apart, in which case the seller keeps looking for a buyer and the buyer resumes the home search.

—Do low home appraisals relate to redlining?

Yes, they are something of a legacy of this now-illegal practice. The term redlining stems from a decades-old pattern of discrimination — lenders color-coded maps to exclude homeowners in Black and other non-White neighborhoods from mortgages, on the grounds that these areas posed a high investment risk. That sort of overt bias was outlawed by the Fair Housing Act of 1968 and by subsequent federal legislation in the 1970s. Still, the ongoing appraisal gap reflects systemic racism that continues to lurk in the housing market.

—What can people do to combat lower home appraisals?

Not much, which is why the issue has gained so much attention. An individual homeowner can’t change the demographics of the surrounding neighborhood and its comps (comparable properties that appraisers use to determine a home’s worth). As far as the individual home goes, news reports have described African-American homeowners preparing for walk-through appraisals by removing family photos and other personal effects that would indicate their race.In general, though, Realtors tell sellers of all races to open a home to buyers and to appraisers only after it has been thoroughly de-cluttered and stripped of personal objects. Sellers of any race or creed are often advised to remove photos, religious or political artifacts and even artwork. The idea is to present a neutral setting that allows buyers to picture themselves in the home — and for appraisers to be able quickly to assess the home’s fundamental features and fixtures.And sellers and buyers need to have a contingency plan in place should the appraisal come in low. Buyers should be prepared to come up with extra cash to bridge the appraisal gap, and sellers should think about whether they’re willing to take a cut to make the transaction happen.

(Visit Bankrate online at bankrate.com.)

©2024 Bankrate.com. Distributed by Tribune Content Agency, LLC.

Minneapolis offers $2 million a year to host the Sundance Film Festival

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The city of Minneapolis is vying for the chance to host the Sundance Film Festival in 2027 and beyond, and has pledged $2 million in annual support to back it up.

“With our thriving arts and entertainment scene, diverse cultural heritage and passionate film community, Minneapolis is the ideal backdrop for the Sundance Film Festival,” said Minneapolis Mayor Jacob Frey in a news release. “There is no city that embraces the arts quite like we do — and Minneapolis already has a long history of supporting independent filmmakers and their art of storytelling. Sundance would be a welcome addition to our theater community, and we’re excited to throw our hat in the ring to host this world-renowned festival.”

In April, Sundance organizers announced they were looking for a new location for the festival, which has called Utah home since its founding in 1985. The festival has faced leadership and sponsorship problems as well as declining attendance in recent years. The Minneapolis City Council unanimously moved to bid for the festival and the city submitted its proposal on June 21.

The CEOs from Target, Best Buy and U.S. Bancorp have committed to provide $2 million each year to sustain and grow the festival. “Everybody wants to be a part of this,” said Film North executive director Andrew Peterson.

In its pitch, Minneapolis touted its “unparalleled private sector, philanthropic and governmental support for the festival, combined with robust existing infrastructure, a nation-leading arts and culture scene, and its welcoming and inclusive community.”

According to Deadline, Sundance will send a search committee to potential new home cities over the next few months. A decision is expected to be made public during the 2025 Sundance Film Festival, which will take place in late January. San Francisco, Chicago, Boulder, Atlanta, Buffalo and Santa Fe have also expressed interest in hosting the festival.

Founded in 1978 by the head of Robert Redford’s production company, Sundance set out to showcase American-made films, highlight the potential of independent film and increase visibility for filmmaking in Utah.

Quentin Tarantino, David O. Russell, Paul Thomas Anderson, Steven Soderbergh, Darren Aronofsky, Kevin Smith and Robert Rodriguez are among the many directors who earned vital early exposure through the festival.

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Republicans move at Trump’s behest to change how they will oppose abortion

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By THOMAS BEAUMONT and CHRISTINE FERNANDO, Associated Press

MILWAUKEE (AP) — The Republican National Committee’s platform committee has adopted a policy document that reflects former President Donald Trump’s position opposing a federal abortion ban and ceding limits to states, omitting the explicit basis for a national ban for the first time in 40 years.

The committee, according to two people briefed on the language, agreed on the text, “We believe that the 14th Amendment to the Constitution of the United States guarantees that no person can be denied life or liberty without due process and that the states are, therefore, free to pass laws protecting those rights.”

Two anti-abortion activist leaders spoke on condition of anonymity to discuss internal party deliberations.

The move comes as Trump imposes his priorities on the committee as he seeks to steer clear of strict abortion language, even while taking credit for setting up the 2022 reversal of Roe v. Wade by the Supreme Court. Trump appointed three of the six justices who voted in the majority to overturn the 1973 abortion rights precedent.

The abortion language was first reported by The New York Times.

Marjorie Dannenfelser, SBA Pro-Life America president, praised the committee for reaffirming “its commitment to protect unborn life through the 14th Amendment.”

Dannenfelser stopped short of endorsing the document’s reflection of Trump’s view that the matter rests entirely with states. “Under this amendment, it is Congress that enacts and enforces it’s provisions.”

The platform is a statement of first principles traditionally written by party activists. Trump’s campaign wants the group drafting this year’s platform to produce a shorter document that excludes statements favored by many conservatives but are potentially unpopular with the broader electorate.

The platform committee begins its meeting Monday, a week before the start of the Republican National Convention in Wisconsin where Trump is scheduled to accept his third straight nomination for president.

Trump has faced months of Democratic criticism over abortion as President Joe Biden’s reelection campaign has highlighted that Trump nominated half of the Supreme Court majority that struck down the nationwide right to abortion in 2022. But among the vocal abortion opponents on the platform committee, some say the aspiration of a federal ban on abortion after a certain stage in pregnancy must remain a party principle, even if it’s not an immediately attainable policy or one that necessarily helps the Trump campaign in November.

“I see that as problematic. We still need these principles clearly stated. Some of these battles are not over,” said Iowa state Rep. Brad Sherman, a platform committee member who supported Trump’s winning Iowa caucus campaign in January and also supports a federal limit on abortion.

While the abortion statement is likely to be the most contested provision in the platform, there may also be disputes over Trump’s preference for tariffs and his isolationist approach to foreign policy and U.S. involvement in global conflicts, particularly in helping Ukraine as it battles Russia.

Conservative activists who are accustomed to having a seat at the table fumed over what they said was a secretive process for selecting committee members and the meeting taking place behind closed doors.

“For 40 years, the Republican Party and the GOP platform have massively benefitted from an open and transparent process,” said Tim Chapman, the incoming president of Advancing American Freedom, a foundation headed by Trump’s former Vice President Mike Pence.

Trump’s campaign has sought to reshape the Republican National Committee into a campaign vessel. It signaled in a memo last month from senior campaign advisers Chris LaCivita and Susie Wiles that “textbook-long platforms … are scrutinized and intentionally misrepresented by our political opponents.”

Trump ally Russ Vought is serving as the policy director of the Republican Party’s platform writing committee while also leading the effort to draft the 180-day agenda for Project 2025, a sweeping proposal for remaking government that Trump said Friday he knew “nothing about” despite having several former aides involved.

Trump had supported federal legislation in 2018 that would have banned abortion after 20 weeks of pregnancy, though the measure fell short of the necessary support in the Senate.

However, after the 2022 midterm elections, Trump blamed Republicans who held strict anti-abortion positions for the party’s failure to secure a larger House majority. He has since been critical of the most stringent abortion bans in individual states.

An AP-NORC poll conducted in June 2023 found that about two-thirds of Americans think abortion should be legal in all or most cases. The poll also found that 6 in 10 Americans think Congress should pass a law guaranteeing access to legal abortion nationwide.

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Biden’s campaign has criticized Republicans for making the platform committee meetings in Milwaukee, Wisconsin, closed to the news media and reminded voters of Trump’s onetime support for a 20-week abortion ban.

Tamara Scott, who is one of Iowa’s two Republican National Committee members and also a platform committee member, said Trump could campaign on the position he holds and also embrace the platform to reflect a longer-term goal of a federal limit.

“It’s our vision. It’s our foundational principles. It’s who we are as a party,” Scott said. “I agree a platform must be clear and concise but it must convey our core principles.”

To several on the committee, that means maintaining support for an “amendment to the Constitution and legislation to make clear that the Fourteenth Amendment’s protections apply to children before birth,” the passage first included in 1984.

Trump was urged to keep that language in the platform, according to a letter signed by leaders of groups opposed to abortion, including Dannenfelser, Ralph Reed, Faith and Freedom Coalition founder and chairman; Tony Perkins, president of the Family Research Council.

That passage, once removed, would be difficult to restore in future platforms, Dannenfelser said.

“The conversation about the platform is about the future. It’s about presidential campaigns 10 years from now, and Senate campaigns and House campaigns, Republican campaigns everywhere,” Dannenfelser said. “It’s not just about this election. And that’s why it matters.”

Associated Press writers Lisa Mascaro and Amelia Thomson-DeVeaux contributed from Washington.

Americans are split over whether Trump should face prison in the hush money case, poll finds

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By BILL BARROW and LINLEY SANDERS | Associated Press

WASHINGTON (AP) — Americans are about evenly split on whether former President Donald Trump should face prison time for his recent felony conviction on hush money charges, according to a new poll from the AP-NORC Center for Public Affairs Research.

Among U.S. adults, 48% say the former president and presumptive Republican nominee should serve time behind bars, and 50% say he should not. About 8 in 10 Democrats think Trump should face prison time, while independents are divided. About half, 49%, of independents say he should, and 46% say he should not.

Most Republicans believe that Trump was mistreated by the legal system and say he should not face jail time. Democrats, conversely, are generally confident that the prosecutors, the judge and members of the jury treated Trump fairly as a defendant.

The results underscore the partisan divide in opinions about the case, which was the first brought against a current or former U.S. president. Both Trump and Democratic President Joe Biden have made the trial central to how they campaign to their respective bases: Biden frequently pointing out that Trump became the first former president to be convicted of a felony; Trump arguing that Democrats orchestrated the case against him for political purposes.

Trump’s sentencing was delayed from Thursday, three days before the Republican National Convention opens, to September at the earliest — when early voting in multiple states will already be underway.

“I thought it was all a sham to begin with,” said Dolores Mejia, a 74-year-old Republican in Peoria, Arizona, who has been closely following the trial. “I wasn’t surprised he got convicted because the court was in New York, a very blue state. … It seemed like it was thoroughly stacked against him.”

A small but notable slice of Republicans have a different view from the rest of their party. The poll found that 14% of Republicans approve of Trump’s conviction, while 12% believe he should spend time behind bars.

“I knew he had a big ego and questionable values when I voted for him the first time in 2016, but I thought the mantle of the presidency would be a humbling experience for him, and I was wrong,” said Leigh Gerstenberger, a Pennsylvania Republican who said he agreed with jurors’ finding in the New York case and believes Trump should spend at least some time behind bars.

“I could not be more disappointed in his conduct both in office and out of office,” the 71-year-old retiree said. “There are plenty of Americans who have spent time behind bars for lesser offenses. President Trump should not be treated any differently.”

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About 4 in 10 U.S. adults are extremely or very confident that Trump has been treated fairly by either the jurors, the judge or the prosecutors. Slightly less than half, 46%, approve of the conviction in the case, in line with an AP-NORC poll conducted in June, while about 3 in 10 disapprove, and one-quarter are neutral.

Some Americans do not believe Trump should be imprisoned but reject his arguments that he’s been treated unfairly by the justice system.

“I don’t think the particular crime deserves time,” said Christopher Smith, a 43-year-old independent in Tennessee. “I see what he did, lying on business records because of an affair, as more of a moral crime,” Smith said, explaining that he believes prison should be a punishment for crimes that involve a convicted person actively harming another person.

The poll found that Americans are less divided about another recent high-profile case. Last month, Biden’s son, Hunter Biden, was convicted of three felonies in federal court for lying about drug use when purchasing a gun. Six in 10 U.S. adults approve of Hunter Biden’s conviction, with much smaller political differences: About 6 in 10 Democrats approve, as do around 7 in 10 Republicans.

About 6 in 10 U.S. adults believe Hunter Biden should be sentenced to serve time in prison because of his conviction in this case, with Republicans slightly more likely than Democrats to agree that prison time is warranted.

The poll of 1,088 adults was conducted June 20-24, 2024, using a sample drawn from NORC’s probability-based AmeriSpeak Panel, which is designed to be representative of the U.S. population. The margin of sampling error for all respondents is plus or minus 4.0 percentage points.

Barrow reported from Atlanta.