The Black Millennial’s Math

There are a great many detriments that remain in the path of black millennials’ struggle for equality and their share of the American dream. But math is not one of them.

I’m an early millennial or, as some people put it, an “old millennial” — meaning I am among the first of the generation that has come to be defined by this term. I attempted to claim a piece of my American dream through homeownership, and quickly I saw how much of a falsehood that dream could be.

I bought my first home in August 2005. I was working as a production assistant at a television network and was excited that I would now have a visual marker of success. I was 25, just a few years out of college, and everything felt possible.

For those of you whose memory of 2005 is foggy, owning a home was supposed to be a guaranteed path to wealth. Home prices were escalating at magnificent rates, maybe as much as 20% per year. Buy a house and you couldn’t lose, as you could sell it in a year for far more than you paid, and in five years, you could double your money. And the best part was that it was all leveraged! If you had a downpayment, the bank paid the rest.

At the time, I was making $28,000 a year — nothing much, especially when you live 10 minutes away from Manhattan — but credit was free flowing, and I qualified for a $250,000 “no doc” adjustable loan. It wasn’t a lot, but with some savings and some money that my mom and great-aunt promised to give me — a privilege a lot of black people don’t have — I knew I’d be able to make a 20 percent down payment.

Banks were offering adjustable rate mortgages, with “teaser” introductory rates that would soar when the real rate kicked in. But so what? By that point, the value of the house would have also skyrocketed, and you would refinance your house at a fixed rate you could afford based on the huge increase in value, using the difference to buy down the mortgage to an amount you could actually afford to pay.

You see, it wasn’t as if they hid the math from you. And while there were a proliferation of mortgage brokers who told buyers this was a lock, the buyers still saw the disclosures informing them that the payments would be twice what they were earning once the teaser rate was over.

My mortgage broker told me I needed to get out of my adjustable loan in two years and get a conventional mortgage. She sort of warned me it was a bad deal, and I could understand why. But she didn’t warn me against doing it at all. She was black, middle-aged and seemed to take a “by any means necessary” approach to black people owning property. I understood that, too. I marched up to my new, small, one-bedroom apartment on the Hill, satisfied. It felt as if I’d broken barriers.

Housing has long been one of the impenetrable stumbling blocks for racial equality. Black homeowners were steered to black neighborhoods, as they weren’t tolerated in white neighborhoods and any real estate agent who sold a house to a black family in a white neighborhood might find a cross burning on their front lawn.

Indeed, “blockbusting” was a means of buying up homes in a white neighborhood on the cheap, by bringing a black family in to devalue the properties. “There goes the neighborhood” was the refrain when a black family showed up. Good old American racism.

But that’s not Reniqua Allen‘s beef. She wasn’t “steered” to a black neighborhood rather than a white one. She bought where she wanted. She wasn’t denied a mortgage based on her race or gender. Money was free and easy. She wasn’t lied to about the significance of her “teaser” rate. She was warned. So what’s her beef?

How much room is there in anyone’s life for a mistake or the perception of a mistake if you’re young and black in America? How much of the American dream hangs in the balance?

A commenter to her op-ed, a realtor, does the math.

I am a Realtor. I saw quite a few of the NINJA (No Income, No Job or Asset verification) loans in the early 2000s. For many, it was an excellent opportunity to buy a home WITHIN THEIR BUDGET and without a lot of documentation and hassle (think service industry workers whose main income is generated through tips). Most agents and mortgage brokers use qualifying ratios to assist in determining your purchasing power. One such ratio suggests that your monthly mortgage should not exceed 25% of your monthly income. For the author making $2333.33/month, her target should have been a $100,000 home she could purchase with a monthly mortgage of $583.00. This works out to an $80,000 mortgage and a 20% downpayment of $20,000. If my math is correct, she bought a $312,500 home and put down $62,500 with the $250,000 mortgage running around $1817.00. That leaves just $516 for other expenses. It is not the color of her skin that ruined the American dream, but her desire to buy more than she could afford. The fact that she was able to keep the house as long as she did and not become a foreclosure statistic is remarkable AND laudable.

When the real estate bubble burst in 2007-08, many people were devastated. Some were black. Some were white. Some were male. Some were female. Most were families. Some were young. Some were old. They all had one thing in common; they didn’t do the math. Or at least didn’t accept that the math didn’t work, that they bought more than they could afford if prices didn’t continue to rise at an unsustainable rate.

I finally decided to put the condo on the market in 2018. My version of the American dream downsized and put on hold. I sold it for far less than I paid in 2005.

That is the downside of the American dream, that you aren’t guaranteed to win no matter what. You made a bet and lost. Lots of people lost, not because of their race or gender but because they ignored and denied the math. There is racism, but this wasn’t it. To paraphrase 1995 Barbie, math is hard. Maybe she knew more than we thought.

11 thoughts on “The Black Millennial’s Math

  1. wilbur

    “The fact that she was able to keep the house as long as she did and not become a foreclosure statistic is remarkable AND laudable.”

    Well, not so much when she had access to bail-out bread from momma and auntie. But the realtor had to say SOMETHING nice about her or risk getting trashed in the comments.

  2. Miles

    That she made the same mistake as so many other people isn’t remarkable. That it’s now being recreated to fit a racial narrative, however, is a sign of the times. It seems nothing that goes wrong can’t be connected to race or sexism as long as one doesn’t let facts get in the way.

  3. B. McLeod

    A long time ago, the concept of what we could “afford” was linked to how much money we actually had. If you signed up for a debt greater than that, there was risk. Particularly, risk that the money you were counting on might not come in.

    Most people today are younger than I am, and most of them have a much higher risk tolerance. Realtors and lending institutions will “qualify” buyers for extraordinarily speculative risk plays. Their formulas assume the buyer/borrower has no income disruptions (layoffs, illness, business failures) for the duration of the loan. In this case, the buyer/borrower also bet on the bubble. A lot of people did. It could have worked out, but it certainly added to the risk of the transaction. The fact that a particular risk play has become common, and that a lot of people are buying into it, does not make it a good idea. Realtors and mortgage brokers will make risk disclosures, but they aren’t going to tell buyers that the buyers “shouldn’t do it at all.” Realtors and mortgage brokers make money on transactions that happen. They will explain what the law of their state of licensure requires them to explain, but they are not the borrowers’ parents, or even the borrowers’ friends. There is no percentage for them in discouraging a risk-tolerant borrower from going for the golden ring.

    1. SHG Post author

      There’s risk tolerance and there’s impossibility. If you’re earning ~$2000 per month pretax, and take a mortgage that will require a monthly payment of $3000, there’s no risk tolerance involved.

  4. DaveL

    I’m a year older than the author of that piece (a young Gen-Xer, apparently, rather than an old millenial). I bought my first home in 2005. I paid something very close to what the author did. Here’s the thing, though – I was making more than three times more. I would have gagged at the thought of buying that home on $28k per year. That’s not some understandable miscalculation, that’s insane.

    Incidentally, my home’s price was also inflated by the bubble and lost value in the crash. I lost out on that, and that loss was the gain of a very nice older couple who used it to fund their retirement.

    1. SHG Post author

      As investments go, at least homes keep you warm at night, which is more than can be said of triple tax exempt muni bonds.

  5. Matthew Scott Wideman

    Marriage and property are the fastest way to create wealth or poverty in America. This axiom knows no race.

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