Following the trend of the 10-year Treasury yield, mortgage rates dropped slightly this week. Specifically, the 30-year fixed mortgage rate fell to 3.89% from 3.92% the previous week. However, due to expectations of even higher inflation, mortgage rates will continue their upward trek.

Although mortgage rates are still historically low, rising mortgage rates may impact affordability, especially for first-time home buyers in minority groups. Comparing housing affordability between White and Black first-time home buyers, White first-time home buyers are twice as likely to be able to afford the typical home compared to their Black counterparts. In the meantime, about 6.9 million White households will turn 30 years old in the next decade, which is the typical age that millennials get married. Forty-three percent of them can afford to buy the typical home. Simultaneously, 1.3 million Black households will approach this milestone during the same period. Only 20% of these households can afford to buy the typical home. In addition, Black home buyers are more likely to have student debt, and they typically own a higher amount ($45,000) compared to their White counterparts ($30,000), according to our recent report. Thus, attaining homeownership will become even more challenging for these buyers. Given that homeownership is the main source of building wealth, this could increase the wealth gap even further between these two groups in the following years. Keep in mind that the typical White family already has eight times the wealth of the typical Black family, according to the Federal Reserve.

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