Home Lending in Montgomery County Neighborhoods
This report on Montgomery County, home to the city of Dayton, Ohio, begins with a broad look at application and origination activity during the past 27 years (1990 to 2016) and then delves into trends during the 13-year period from 2004 to 2016. Looking at this 13-year period allows us to examine lending activity in the years leading up to and into the Great Recession and compare it to the lending activity in the years following the Great Recession. Using maps and a series of figures and tables, we tell the story of mortgage lending during these periods from both the neighborhood and borrower perspectives, with a particular focus on highlighting the differences observed in pre- and post-Great Recession periods.
- Preceding the Great Recession, home mortgage application rates were higher in Montgomery County’s low- and moderate-income (LMI) neighborhoods compared to the county’s non-LMI neighborhoods. In 2008, the application rates in the LMI neighborhoods dropped below the rates in non-LMI neighborhoods and have remained at a level lower than in non-LMI neighborhoods through 2016, mirroring the national trend.
- Declines in application rates in Montgomery County’s LMI neighborhoods were notably larger compared to declines in the nation’s LMI neighborhoods. From 2004 to 2016, application rates fell by 84 percent in Montgomery’s low-income neighborhoods and by 74 percent in its moderate-income neighborhoods. Nationally, application rates also decreased during this period, but the declines were not as large: Rates fell by 71 percent in the nation’s low-income neighborhoods and by 63 percent in moderate-income neighborhoods from 2004 to 2016.
- In the post-Great Recession years, application rates in Montgomery County’s low-income neighborhoods remained relatively flat, while the middle- and high-income neighborhoods, and, to a lesser degree, moderate-income neighborhoods, experienced jumps in application activity driven mainly by low interest rates and refinance applications. This was similar to the national trend.
- Since the Great Recession, origination rates in each neighborhood income group exceeded rates in the pre-Great Recession years. During this 13-year period (2004 to 2016), origination rates reached their highest point in 2015 in all but the high-income neighborhoods, which reached their peak rate in 2009. However, origination rates fell in all neighborhood income groups from 2015 to 2016, with the largest decline (6 percentage points) occurring in the low-income neighborhoods of Montgomery County.
- While home purchase loan originations declined from 2005 to 2016 for non-Hispanic white and non-Hispanic black borrowers, the declines were greater for black borrowers (59 percent) than they were for white borrowers (28 percent). Looking at origination rates by race and borrower income, we find that black borrowers, regardless of income, are less likely to get approved for a home purchase loan than white borrowers are in each year we examined. Fifty-six percent of black LMI borrowers who applied for a home purchase loan in an LMI neighborhood in 2016 received one, compared to 73 percent of white LMI borrowers. In 2016, home purchase origination rates in LMI neighborhoods were also lower for black non-LMI borrowers (77 percent) compared to those for white non-LMI borrowers (81 percent).
- The share of purchases made in LMI neighborhoods declined for both race and income groups from 2005 to 2016. Declines were largest for black borrowers, whose share of home purchases made in LMI neighborhoods dropped 37 percentage points (to 29 percent) in 2016. By comparison, the share fell 11 percentage points (to 13 percent) for white borrowers in 2016. However, black borrowers—regardless of income—are much more likely than their white counterparts to purchase homes in LMI neighborhoods.
The views expressed in this report are those of the author(s) and are not necessarily those of the Federal Reserve Bank of Cleveland or the Board of Governors of the Federal Reserve System.