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Mellody Hobson is President of Ariel investments; a Chicago-based money management firm that serves individual investors and retirement plans through its no-load mutual funds and separate accounts.  Additionally, she is a regular financial contributor and analyst for CBS News.

Tom: Today, we are talking housing.  

Mellody: We are, Tom. The American housing market has seen some positive trend lines develop over the last year, and it looks like 2015 will be better. This is good for the job market, the broader economy, and for Black America.

Tom: Why is a good housing market also good for Black America?

Mellody: There are a couple of reasons, Tom. Last week, i mentioned that the jobs report was strong, particularly for African-American men. That trend has been driven in part by the improving housing market and growth in the industries tied to it. After all, over 35% of black men were employed in production, transportation, construction and natural resource industries, according to the U.S. Census – all industries that will get a boost from a positive housing market. Additionally, housing comprises a larger proportion of the wealth of Black Americans than it does for other racial groups. This is one of the reasons that the housing crisis impacted our community so disproportionately. It also means that a stable and housing market benefits Black America.

Tom: The housing crisis certainly did hurt a lot of people. Are there signs that people are getting relief on that front?

Mellody: There are some signs that it is getting better, particularly when it comes to people keeping their homes. In the wake of the downturn, responsible lending found that among recent borrowers, nearly 8% of both African Americans and Latinos lost their homes to foreclosures, compared to 4.5% of whites. Those racial and ethnic disparities in these estimated foreclosure rates hold even after controlling for differences in income patterns between demographic groups.

In 2014, the number of homes repossessed by banks fell 29% last year to the lowest level since 2006, a year before the subprime mortgage crisis erupted, according to data released Thursday. One of the main reasons for the drop: fewer homes entered the foreclosure process last year. The number of foreclosures being initiated fell 14% compared to a year earlier – the lowest level since 2006. All told, 643,193 U.S. homes entered the foreclosure process last year. That represents a 70% drop from their 2009 peak of about 2.14 million homes.

Tom: That is great news! What specifically looks good in the housing market?

Mellody: The biggest indicator of the housing recovery is home price appreciation. This past year, price appreciation has been steady, helping to right the ship when it comes to household balance sheet repair. This is very important in helping Americans to recover from the wealth declines associated with the great recession. Data from the Federal Reserve has shown a $2.3 trillion increase in housing equity for households from the start of 2013 through the third quarter of 2014. Such wealth gains are key to middle class consumption and investment decisions.

Tom: Are there any other items that are looking bright?

Mellody: There are! First of all, single-family construction is expected to grow in 2015 as the market sees increases in housing demand among prospective first-time homebuyers. Typically first-time purchases make up about around 30% of newly built home sales. However, in the past few years, the market share of first-timers for both new and existing home sales has been weak, with industry surveys suggesting that this share was less than 20% in 2014.

So as wages and job prospects improve, and these aspiring homeowners begin to enter the market, the housing market should get a good boost. Additionally, despite the forecasted growth in single-family construction, rental demand should remain also strong in 2015.

Tom: So 2015 is shaping up to be bright in terms of the housing market. Thanks for the update, Mellody!

Mellody: You are welcome, Tom!

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