Hey girl, hey!
It's been a while, so I officially want to say happy 2020 to you all. Today, I have another excellent guest post for you from the lovely Justine Chan, founder ofLive With Plum, the home buying guide for the modern women. Justine started Live With Plum after going through her real estate journey and seeing how little resources there were for home-buyers, especially first-time homeowners. And as a millennial woman of color, there aren't many familiar stories to reference, even though minorities are a substantial and growing segment of homeowners in America.
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We've received a lot of questions from women about home ownership and reasons why women aren't receiving the same returns on their homes as their male counterparts, so without further ado, please give a warm 'hey girl, hey' to Justine.
Today, on average, a woman working full time earns 80.7 cents for every dollar a man working full time earns. Over time, this leads to women accumulating less wealth than men. On top of the gender gap in salary, another well-published and researched gender gap is that of investing. A higher percentage of men invest in equities than women. Since equity investments are one of the primary means of investing, women are again at a disadvantage at accumulating wealth over the long term by not opting into these assets. While we lag behind men on wages and investing in equities, we win (statistically anyway) when it comes to buying homes, as single women purchase homes at twice the rate of single men. For many women, we obtain a home before investing in equities even though the financial requirement of acquiring a home has much higher stakes(where you can purchase a stock for a mere few dollars). ​ A new study by professors at the Yale School of Management has found that the gender gap in housing returns was eye-opening and highlighted the implications of housing returns on wealth accumulation by women. In the study, researchers found that men's returns on housing outperformed women's returns by almost six (6) percentage points per year after adjusting for leverage. Unfortunately, this is not a one-time anomaly as the gender gap in housing returns persisted for all 26 years studied in the sample data set (1991 to 2017). Also, the results indicate that older women with lower education left the most money on the table as zip codes with these attributes were associated with more significant gender gaps. So what are the reasons behind the gender gap? Let's explore:
​Reason 1: Not timing the market.
​Approximately half of the gap in housing returns can be explained by the difference in timing when women and men bought or sold their homes. The women in the study tended to buy when housing prices were higher and sell when housing prices were lower. The study does not go on to explain why this was the case, but a potential hypothesis is that perhaps men tend to track the market more and are aware of the fluctuations. This is purely my guess, but when you consider the fact that men are exposed to investing (equities) at higher rates than women, tracking and timing the market is probably a more familiar concept to this group of investors.
​Reason 2: Ineffective Negotiations.
​Another cause of the gender gap in housing returns is that women engage in less effective negotiations as compared to men. On average, women buy for 1-2% more than men and sell for 2-3% less. Because the study looked at the same property over time, the researchers concluded that women bought the properties when they were listed at higher relative prices and chose to list for lower comparable prices. During the purchase process, women also do not negotiate as effectively, resulting in worse discounts relative to the listing price. As a minority (Asian) woman, I have a few more comments on this finding. It reminds me of the wage gap, where studies have shown that women are uncomfortable negotiating compensation and don't do it as effectively as men. Tellingly and sadly, the transactions with male sellers and female buyers are associated with the smallest discounts. In summary, the results of this entire study make me want to scream and shout, but frankly, that will not move the needle. The actions that will are (1) spreading awareness of the gender gap in housing returns and (2) educating ourselves on the home buying and selling process so together, we can buckle this statistic.
​Justine Chan is the founder of Live With Plum, a real estate education resource empowering all women on their journey towards home-ownership.