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Housing Perspectives

Research, trends, and perspective from the Harvard Joint Center for Housing Studies

Home Prices Rose Fastest in Communities of Color During the Pandemic

Home prices across the US rose significantly during the pandemic, bolstered by historically low interest rates, strong demand, and the tightest supply conditions seen in 40 years. Rapid price appreciation has been widespread, but especially in communities of color (zip codes where at least half of residents are people of color) and majority-Black neighborhoods. Behind this higher-than-average growth, however, lies a more complex story: even while this was happening, prices were also more likely to fall in communities of color.

According to our tabulations of Zillow data, typical home values rose 8 percent annually in December 2020, up from 4 percent the year prior and climbing to just over $266,000. Home price growth was widespread and robust across much of the country. From December 2019 to 2020, nominal home values increased in 92 percent of the 30,000 zip codes tracked by Zillow (which contain 99 percent of the nation’s population). One third of zip codes experienced especially rapid home price growth of 8 percent or more, including over half of zip codes that are communities of color. On average, home price growth in communities of color outpaced less diverse zip codes as well over the past year. Typical home values in December rose 9.3 percent on average in communities of color—including 10.3 percent in zip codes where a majority of the population is Black—compared with 6.6 percent in neighborhoods where at least 90 percent of the population is white (Figure 1).

Figure 1: In 2020, Home Prices Rose Fastest in Communities of Color

The figure shows the annual change in typical home values every month in 2020 for zip codes that are 0-9 percent people of color, 10-49 percent people of color, and at least half people of color. Price growth has accelerated in all neighborhoods but especially in communities of color, where it rose from 3.8 percent in January to 9.3 percent in December.

Notes: Data are for zip codes and population weighted. Recent monthly data are subject to revision.

Source: JCHS tabulations of Zillow data.

The rapid pace of price growth in communities of color was not geographically confined. In 47 of the 50 largest markets in the country last December, average price growth in communities of color exceeded metro-wide price growth by 2.0 percentage points. In the Philadelphia metro, for example, the 51 zip codes where people of color represented at least half the population averaged 14.3 percent price growth in December, 3.5 percentage points higher than the price growth in all 353 Philadelphia metro zip codes. In Atlanta, prices in communities of color rose 10.6 percent, 1.4 percentage point higher than price growth overall.

Communities of color tend to have other distinguishing characteristics relative to majority-white communities. In the nation’s larger markets, for example, communities of color tend to have higher-than-average population densities, lower median incomes, lower home values, and a lower rate of homeownership than the metro area as a whole. Some of these characteristics—namely lower incomes and home values—have also been associated with higher home price growth since March 2020. For instance, home prices also rose faster than average in lower-income neighborhoods.

However, communities of color also experienced a much wider range of price appreciation. While typical home values have risen fastest on average in communities of color since the start of the pandemic, prices also continued to fall in many of these neighborhoods. Indeed, between 6 and 13 percent of neighborhoods tracked by Zillow experienced year-over-year home price declines in any given month during the pandemic. In December, prices declined in 6 percent of all zip codes and 7 percent of communities of color, including 12 percent of majority-Black neighborhoods.

In some of these neighborhoods, home prices remain underwater relative to the peaks attained in the mid-2000s. Of the 18,000 zip codes where Zillow has home price data going back to 2004 (which covers 83 percent of the nation’s population), roughly one-fifth (19 percent) had typical home values below the peak of the mid-2000s. Among communities of color, over a quarter (26 percent) had prices below last decade’s peak (Figure 2). The rate is even higher—36 percent—among the 616 communities that are majority Black. This partly reflects a more severe downturn in prices in communities of color following the crash; indeed, those communities had year-over-year price declines approaching 15 percent on average in early 2009, compared with an average of 10 percent nationwide.

Figure 2. Communities of Color Are More Likely to Have Home Values Below Prior Peaks

The figure shows the share of zip codes nationally where home prices are still below the previous peak attained in the mid-2000s, prior to the Great Recession. Communities of color were more likely to have home prices below prior peaks. Indeed, fully 26 percent of communities of color had home prices below prior peaks compared to 14 percent of zip codes where people of color are 0-9 percent of the population.

Notes: Data are for zip codes with prices dating back to 2004, which account for 83 percent of the nation’s population. Recent monthly data are subject to revision.

Source: JCHS tabulations of Zillow data.

Home prices have risen rapidly across most of the country since the start of the pandemic, with even greater appreciation on average in communities of color and majority-Black neighborhoods. Despite faster average growth, home prices continued to decline in a disproportionate share of these zip codes. Looking ahead, both stagnating home prices and extreme price volatility might compound the challenges faced by communities of color, and Black communities in particular, in building wealth.