Concerns over potential redlining raised in study of spotty recovery of home prices in metro Atlanta

By David Pendered

Coming Wednesday: Why some Atlanta residents struggle to find work, and what the city can do to help.

Signs of the discriminatory lending practice called redlining have reemerged in metro Atlanta, according to a new analysis of home sale prices.

Dan Immergluck. File/Credit: David Pendered

Dan Immergluck. File/Credit: David Pendered

Georgia Tech Professor Dan Immergluck reached this conclusion in his study that determines the extent of the uneven recovery of home prices in metro Atlanta.

Immergluck said the report shows the need for regulators to refocus on fair lending. Risk-averse lenders have gone so far in restricting loans that entire sections of metro Atlanta are essentially off limits to groups of home shoppers who traditionally bought in those neighborhoods.

“Lenders have gone too far because they don’t feel pressure from the fair lending side,” Immergluck said. “Lenders will say that if a loan goes bad, they’re required to compensate [the federal government] for the loan.

“Yeah, if you make a bad loan, you still have to make it good,” he said. “But you still have to make loans.”

Redlining got its name from the practice of drawing red circles around geographic areas, often predominately minority, inside of which lenders would not make loans. The Atlanta Journal-Constitution was awarded a Pulitzer Prize for Investigative Reporting in 1989 for detailing the practice in metro Atlanta, in a series titled, “The Color of Money,” which led to significant reforms in those policies.

Much of Immergluck’s report quantifies the uneven rebound of housing prices in metro Atlanta. It’s part of his research into issues including housing and real estate markets, mortgage finance, and fair lending. His most recent book was reissued in 2011: “Foreclosed: High-Risk Lending, Deregulation, and the Undermining of America’s Mortgage Market.”

The greatest rebound of home prices in metro Atlanta has occurred in communities that are predominately white and comparatively affluent, according to the report.

The greatest recovery of home prices

The greatest recovery of home prices

“There are places that recovered, but they tend to be affluent and they don’t depend on mortgage markets,” Immergluck said. “But mortgage markets for $800,000 and above have always worked, and will always work, fine – regardless of regulations.”

This finding contradicts the presumption that the recovery of values would be shared across the region.

“Prices should have come back more evenly,” Immergluck said. “The demographics of the city are not that different from 2001. We shouldn’t have half as many mortgages [in some demographics] as we did then. That’s what is keeping the prices down in these neighborhoods.

“I think we have a new kind of era of a reemergence of redlining that’s supported, or justified, by concerns over credit quality – just like redlining was in the 1970s,” Immergluck said.

Immergluck said he used 2001 as the benchmark because the mortgage market was fairly healthy. Additionally, the trend of using home equity as a source of ready cash had not proliferated.

In addition to determining the uneven nature of price recovery, the report confirmed that the greatest collapse in home prices occurred in predominately non-white areas – especially in some communities where speculators bought homes and flipped them for significant profits. Mortgage fraud was rampant in some of these areas.

A greater proportion of white homebuyers have qualified for mortgages in metro Atlanta, compared to non-white buyers. Credit: Dan Immergluck

A greater proportion of white homebuyers have qualified for mortgages in metro Atlanta, compared to non-white buyers. Credit: Dan Immergluck

Immergluck concludes the report with data that shows minorities trail whites in the recovery of their ability to get a home loan.

That is to say, as credit standards have tightened since the great recession, a greater proportion of whites than non-whites are able to qualify for a mortgage.

This section of the study compares two years, 2012 and 2001, and concludes that lending rates have recovered at greater rates for whites than for non-whites.

The figures follow and are sourced to Home Mortgage Disclosure Act data for Atlanta Metropolitan Area:

  • African American – 55.8 percent;
  • Latino – 63 percent;
  • White – 66.9 percent.

The consequence of this lending pattern is a vicious cycle in which lenders won’t provide loans in certain neighborhoods.

Without loans, houses can’t be sold.

Without sales to drive up home prices, prices will languish because there aren’t comparable sales that lenders consider as a factor in their decision to provide a loan.

“It’s data-based redlining that shuts off credit almost completely to some parts of town,” Immergluck said. “It makes the market not work right.”

 

David Pendered, Managing Editor, is an Atlanta journalist with more than 30 years experience reporting on the region’s urban affairs, from Atlanta City Hall to the state Capitol. Since 2008, he has written for print and digital publications, and advised on media and governmental affairs. Previously, he spent more than 26 years with The Atlanta Journal-Constitution and won awards for his coverage of schools and urban development. David graduated from North Carolina State University and was a Western Knight Center Fellow. David was born in Pennsylvania, grew up in North Carolina and is married to a fifth-generation Atlantan.

5 replies
  1. atlanta agent says:

    Thank you for the excellent article. Another issue to consider in addition to redlining is that as the properties sit vacant they languish and further bring down certain neighborhoods via vacant/abandonment and vandalism.  Many of these homes are not move in ready but another trend is that banks have completed thousands of foreclosures and they immediately deliver these homes into the hands of other banks/ investment groups for pennies on the dollar.. thus circumventing the local agent from earning a commission from the sale and preventing affordable owner occupant housing to revitalize those neighborhoods.  I went to a meeting to discuss some of these FC issues and an investment group that works directly with the banks even stated that it is felt some populations do not deserve to own homes. they need to be renters.  This is a start however I see that more investigation should be done to really uncover other areas upon which current practices further prevent communities from participating in the economic recovery.Report

    Reply
  2. atlanta agent says:

    Thank you for the excellent article. Another issue to consider in addition to redlining is that as the properties sit vacant they languish and further bring down certain neighborhoods via vacant/abandonment and vandalism.  Many of these homes are not move in ready but another trend is that banks have completed thousands of foreclosures and they immediately deliver these homes into the hands of other banks/ investment groups for pennies on the dollar.. thus circumventing the local agent from earning a commission from the sale and preventing affordable owner occupant housing to revitalize those neighborhoods.  I went to a meeting to discuss some of these FC issues and an investment group that works directly with the banks even stated that it is felt some populations do not deserve to own homes. they need to be renters.  This is a start however I see that more investigation should be done to really uncover other areas upon which current practices further prevent communities from participating in the economic recovery.Report

    Reply
  3. health_impact says:

    Oh, there is totally redlining going on. A guy in my neighborhood bought a gutted house that had been left vacant by an absentee investor for years – then he couldn’t get a home improvement loan because the bank told him “your ZIP code is a ‘rapidly declining area’ and we don’t loan there”. I ask you, which is more likely to cause declining values – the desertion of absentee investors allowing owner-occupants and neighbor-investors to restore and reoccupy home, or the fact that no one actually can buy or restore a home due to the bank’s refusal to lend? What happens then, areas which had already suffered once from fraud and subprime lending just have to sit around watching vacant properties rot to the ground? It’s not like the banks themselves are taking good care of the foreclosed homes they own…Report

    Reply
  4. health_impact says:

    Oh, there is totally redlining going on. A guy in my neighborhood bought a gutted house that had been left vacant by an absentee investor for years – then he couldn’t get a home improvement loan because the bank told him “your ZIP code is a ‘rapidly declining area’ and we don’t loan there”. I ask you, which is more likely to cause declining values – the desertion of absentee investors allowing owner-occupants and neighbor-investors to restore and reoccupy home, or the fact that no one actually can buy or restore a home due to the bank’s refusal to lend? What happens then, areas which had already suffered once from fraud and subprime lending just have to sit around watching vacant properties rot to the ground? It’s not like the banks themselves are taking good care of the foreclosed homes they own…Report

    Reply

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