Part II: The Twin Cities housing market

In last month’s article about the Twin Cities housing market during COVID-19, real estate professionals characterized the market as “frenzied.” A picture emerged of Minneapolis and St. Paul homes selling well above their asking price in a climate of multiple offers. While this is a benefit to sellers, it leaves many buyers, especially first-time home buyers and buyers without deep pockets, unable to compete.
Trent Bowman is the vice president and business development officer at MidWestOne Bank, where he continues his 25-year commitment to working with aspiring minority homeowners. He also serves as president of the Twin Cities Chapter of the National Association of Real Estate Brokers (NAREB).
NAREB is an equal opportunity and civil rights advocacy group founded in 1947 to ensure that African Americans (and other people of color) receive fair treatment in all real estate transactions. Founded in 1947, it is the oldest African American trade organization in the country.

Democracy in housing
NAREB has chapters across the United States, unified in their vision of creating democracy in housing for all. When asked if that vision is any closer to becoming a reality after almost 75 years, Bowman said, “No. It has not yet been achieved – not in the Twin Cities or anywhere else in this country.”
In Bowman’s opinion, “A prospective minority home buyer needs to have a team behind them, because there are obstacles all along the way to home ownership.” The team at NAREB Twin Cities includes African American real estate brokers, mortgage lenders, real estate lawyers, appraisers, home inspectors, real estate instructors, insurance professionals, and more. Visit www.narebtc.com to learn more about their housing advocacy work and resources for prospective minority homebuyers.

Homeownership starts with
education
Homeownership is the surest way to build family wealth and strengthen communities –but Black homeownership rates have dropped from 29% to 23% in the last decade. According to Bowman, “Foreclosure rates were higher in communities of color nationwide after the recession of 2008-09, and it has gotten a lot harder to get approved for loans.”
There are several non-profit organizations in St. Paul poised and ready to work with minority clients considering homeownership; in addition to providing resources, they are sending the message that potential home buyers should stop telling themselves that home-ownership is beyond their reach.
The list of these organizations includes the Homeownership Opportunity Alliance, NeighborWorks Home Partners, Hallie Q. Brown, Twin Cities Urban League, Model Cities, and the Neighborhood Development Alliance, and many others. Each offers homeownership classes, which are a prerequisite for applying to any organization for down payment assistance.
According to Bowman, one of the most crucial steps in the process of buying a home is choosing the right loan officer. He said, ”We help prospective homebuyers understand the importance of building their credit, strengthening their savings plan, and coming in to the bank prepared for success. Too many times, minority loan applicants are denied for the wrong reasons and it ends up being very discouraging.”
He continued, “A good loan officer will take the time to get to know a customer. This is not a transaction you do over the phone, but a sit-down conversation to discuss financial goals and realities. A dream home isn’t just a home a customer can qualify for, but one that they can afford to stay in for a long time.”

Housing discrimination continues
Racial covenants were restrictive deeds that limited where people of color could live. The first racial covenant in Minneapolis was legalized in 1910, and the practice soon spread across the Twin Cities.
In the 1930s, “redlining” was created to keep people of color from buying homes in white neighborhoods.
The Federal Housing Administration (FHA) used redlining as a way to rate risk factors for government-backed mortgages. Color coding gave favorable scores to neighborhoods with racial covenants in place, and marked them with blue. Unfavorable scores were given to neighborhoods where African Americans and/or “undesirable” immigrants lived, and they were marked with red. It became nearly impossible for people of color to get FHA loans, because their redlined neighborhoods were rated as too risky for consideration.
Although the Fair Housing Act made redlining illegal across the country in 1968, housing discrimination is far from over. Bowman said, “The FHA loans that were once hard for people of color to get, are now often the way they enter the housing market. Some listing agents state in their purchase agreements that they will not work with buyers who have FHA financing. That’s a problem. Sellers may prefer buyers with conventional financing or, better yet, cash. FHA buyers can’t offer more than the appraised value of the home, which limits how competitive they can be in their offer.
“Some listing agents will also ask buyers to submit what we call a ‘love letter,’ if there are two offers on a property that are essentially equal. In a love letter, the buyers introduce themselves and say why the seller should accept their offer over the other. These letters can become quite personal, detailing family make up, jobs, history in the neighborhood, and common interests. Sometimes a picture is included. If one buyer comes from the same background as the seller, and the other is a person from a completely different background or an immigrant who doesn’t speak English as their first language, whose offer do you think the buyer will accept?”
To learn more about the history of racial restrictive covenants in Minnesota, and their lasting effect on the Twin Cities’ housing market today watch “Jim Crow of the North on TPT: www.tpt.org/minnesota-experience/video/jim-crow-of-the-north-stijws/