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Black Homebuying after the Crisis: Appreciation and Segregation Patterns in Fifteen Large Metropolitan Areas
Abstract
In recent years, some have questioned the financial wisdom of homeownership and, especially, Black homeownership. This skepticism, especially regarding Black homeownership, is understandable, in part because the mortgage crisis dealt particularly heavy blows to Black homeowners and neighborhoods. However, as the broader housing market has recovered, Blacks have not benefitted as much as they might have due to their relatively low rates of homebuying following the crisis. One persistent concern around the issue of Black homeownership is the notion that home values have not always appreciated as much in the places where Blacks tend to purchase homes. A second, and related, concern is the extent to which Black homebuyers are able to purchase homes outside of majority Black neighborhoods, including in predominantly white neighborhoods. We address the potentially interrelated issues of the segregation of Black homebuying and the appreciation of homes purchased by Blacks in the wake of the crisis. First, using census-tract-level home value appreciation data, we estimate the 2012 to 2017 appreciation rates of homes purchased by 2012 buyers using mortgages, and break these out by the race and ethnicity of homebuyers in 15 large metropolitan areas. We look at how appreciation patterns vary across the 15 metros. We then examine the ethnoracial composition of census tracts where homebuyers receiving mortgages purchased homes in 2017. We conclude with a set of policy recommendations including enforcing and strengthening consumer protection, fair lending and community reinvestment policies, maintaining and strengthening Federal Housing Administration lending, limiting the degree of risk-based pricing in the mortgage market, providing downpayment assistance, and supporting community development financial institutions.
... There is a paradox here because, although homeownership comprises a greater share of the Black wealth than it does white wealth, white families have historically benefited from larger home values and often greater wealth accumulation via homeownership than Black families (McCoy and Choi, 2020;Perry et al. 2018). Historically, appreciation rates of Black-owned homes have often lagged those of white-owned homes, especially when spanning the 2007-2011 subprime crisis, which hit Black neighborhoods especially hard (Immergluck et al., 2019). On top of this, subprime lending, risk-based pricing, and other features of racialized mortgage markets left many Black homeowners with high-cost, often predatory loans, which frequently turned what otherwise could have been beneficial home purchases into disasters (Immergluck, 2011a). ...
... Extremely tight mortgage markets in the wake of the subprime crisis meant that millions fewer Black families were able to buy a home than could have if mortgage markets had been functioning normally (Goodman et al., 2015;Immergluck et al., 2019). This occurred precisely when it was a particularly good time to purchase a home, while values were low and about to begin a more than eight-year run of appreciation. ...
... This occurred precisely when it was a particularly good time to purchase a home, while values were low and about to begin a more than eight-year run of appreciation. As a result, the collapse of an under-regulated and heavily privatized mortgage market slammed Black homeowners and neighborhoods on the way down, and then afterwards, too many Black households were locked out of the benefits of the broad national recovery (Immergluck et al., 2019;McCargo and Choi, 2020) ...
... The racial wealth gap has since emerged as a major rallying point for racial justice advocates (Sullivan et al., 2015;Asante-Muhammed et al., 2017;Baradaran, 2017;Jones, 2017;Darity et al., 2018;Collins et al., 2019;Immergluck et al., 2019). Proposals to narrow the wealth gap have come from diverse policy perspectives, but the one gaining perhaps the most traction has called to expand Black homeownership (Brennan et al., 2017;Goodman and Mayer, 2018;Immergluck et al., 2019;McCargo, 2019). ...
... The racial wealth gap has since emerged as a major rallying point for racial justice advocates (Sullivan et al., 2015;Asante-Muhammed et al., 2017;Baradaran, 2017;Jones, 2017;Darity et al., 2018;Collins et al., 2019;Immergluck et al., 2019). Proposals to narrow the wealth gap have come from diverse policy perspectives, but the one gaining perhaps the most traction has called to expand Black homeownership (Brennan et al., 2017;Goodman and Mayer, 2018;Immergluck et al., 2019;McCargo, 2019). The theory undergirding this proposal holds that since wealth is so closely tied to residential property ownership in the US and since white households have a higher homeownership rate than Black households (72% to 41%; US Census Bureau, 2018a; 2018b), reducing the racial homeownership gap will significantly reduce the racial wealth gap. ...
... Since 'homeownership has [historically] been the best way to build wealth' (McCargo, 2019), policymakers should aim to expand Black homeownership. Proponents of this perspective thus recommend policies that would reduce down payments, extend the availability of low-interest loans, and encourage affordable owner-occupied housing construction (Brennan et al., 2017;Goodman and Mayer, 2018;Immergluck et al., 2019;McCargo, 2019). ...
In the wake of the 2007–08 housing crash, the Black–white wealth gap reached a staggering 20 to 1. Since then, a growing chorus of influential voices has proposed measures to increase the Black homeownership rate as a means to narrow the gap. Others, however, have argued that the uneven racial geography of home price appreciation necessarily restricts the degree to which Black households, in the aggregate, can build wealth via homeownership. We aim to contribute to these debates by theorizing a racial appreciation gap as a central feature of urban housing markets under racial capitalism, and analyzing how neighborhood racial and income characteristics have structured home price appreciation from before the height of the housing boom (2000–03) to its post‐crisis recovery (2014–16). Focusing on the two counties that encompass Atlanta, Georgia, USA—an area famous for Black prosperity—we find that a neighborhood's racial composition has a more salient impact on home price change than its income. Results indicate that when a place is marked as Black, this may itself inhibit home price appreciation, suggesting that an enduring racial appreciation gap may limit the potential for Black homeownership to substantively narrow the racial wealth gap.
... After a century of Whiteness as property, more nuance has emerged amidst growing diversity. Local and national studies report that home values appreciate faster in stably integrated and diverse neighborhoods than in overwhelmingly White communities (Immergluck et al. 2019;Moye and Thomas 2018). But Black spaces continue to be devalued unless and until gentrification leads to broader White appeal (Hyra and Rugh 2016;Immergluck et al. 2019). ...
... Local and national studies report that home values appreciate faster in stably integrated and diverse neighborhoods than in overwhelmingly White communities (Immergluck et al. 2019;Moye and Thomas 2018). But Black spaces continue to be devalued unless and until gentrification leads to broader White appeal (Hyra and Rugh 2016;Immergluck et al. 2019). Moreover, while durably integrated spaces are valued more highly than White spaces, White residents (often the numerically dominant group) benefit the most, even if the benefits are more equal than in more segregated spaces (Howell and Korver-Glenn 2020). ...
How we organize community and housing tells a great deal about the interactions and exchanges between the people who live in them. Social trends are visible in housing before they are elsewhere. So, this is a good institution to study the effects of racism. According to Rugh, the 240 “low segregation-high education” counties in the United States represent the nation’s most racially integrated and well-educated Americans. On average, they are majority-White, and closely reflect the nation’s racial composition. These counties rejected Trump in 2016 and more so in 2020. Other counties that are quickly growing economically and becoming better educated and more racially integrated also rejected Trump. Rugh suggests that another trend is emerging as well. There is new evidence that home values appreciate faster in stably integrated and diverse neighborhoods than in overwhelmingly White communities. Integrated spaces are now valued more highly than all-White spaces. These trends have major implications for how White Americans will respond to the nation’s changing demographics and to the continuing social cost of maintaining racial segregation.
... Some research has found incremental, but modest, change in the racial impact on homebuying preferences across racial groups (Howell & Emerson, 2018). Immergluck et al. (2019), however, found an incrementally greater preference by Black homebuyers for racially diverse communities, leading to increased numbers living in suburban or exurban communities, or outside metro areas altogether. ...
... Two other variables that have received attention in postrecession homebuying research are timing and place. In one recent study, Immergluck et al (2019) found significant variations in the home price appreciation of postrecession Black homebuyers in the 15 largest metro areas, finding that Black and Latinx buyers in medium-or high-appreciation metro areas saw more home price appreciation than their White counterparts did, but the inverse was true in lowappreciation metro areas. Other research gives support to the proposition that racial and spatial factors are usually stronger predictors of appreciation than timing is (Newman & Holupka, 2016). ...
Homebuying by African American households in the United States dropped sharply after the foreclosure crisis but has rebounded since 2013. As Black homebuyers have returned strongly to the homebuying market, however, their spatial decisions have shifted significantly. Using Home Mortgage Disclosure Act data for a cluster of large legacy cities, we found that in comparison to earlier periods, recent Black homebuyers are significantly more likely today to be buying homes in suburban rather than central-city locations and less likely to buy in predominantly African American rather than racially mixed census tracts within central cities. These preference shifts have particularly problematic implications for the predominantly Black middle-income neighborhoods that emerged in these cities in the 1960s and 1970s. Building on previous research that has documented a significant decline in socioeconomic and housing market conditions in those neighborhoods since 2000, we suggest that these shifts in homebuying patterns, although not causing those declines and arguably reflecting rational decisions by homebuyers, nonetheless represent an existential threat to these neighborhoods’ viability. To succeed in stabilizing or reviving these neighborhoods, efforts by public agencies or community organizations must address the reasons for their loss of homebuyers.
... Longer periods of homeownership will be more advantageous for building up principal and benefitting from price appreciation, but lower income homeowners are also more likely to face volatile local home prices and to exit homeownership during economic downturns, potentially erasing these gains (Belsky et al., 2018, Goodman & Mayer 2018. Importantly, a number of papers show that differences in housing price appreciation for racially diverse neighborhoods affect housing wealth outcomes accumulation for Black homeowners (examples include Flippen [2004], Immergluck et al. [2019], and Newman and Scott Holupka [2016]). Yet Santiago et al. (2010) and Herbert et al. (2013) still demonstrate consistent positive financial gains to lowincome and nonwhite homeowners from homeownership overall. ...
Housing affordability is a key policy concern and an important component of sustainable homeownership. It follows that reducing housing costs without increasing the risk of mortgage default is a critical approach to sustaining homeownership for current and future generations. In this paper, we break down the different elements of housing costs, specifically focusing on the nuances of mortgage costs. We use internal Fannie Mae data to establish a pro forma of housing costs for different owner-occupant borrower profiles over a typical ownership period (all homebuyers, first-time homebuyers [FTHBs], and low-income first-time homebuyers [LI FTHBs]). We find that the biggest contributors to overall housing costs are transactions costs, ongoing utility expenses, property taxes, home improvement costs, and the component of the mortgage interest rate that compensates investors for the time value of money, with utilities and home improvement costs particularly conspicuous for FTHBs and LI FTHBs. The guaranty fees charged by the government-sponsored enterprises and private mortgage insurance are estimated to be less than 6% of the cost of homeownership. These general patterns hold across racial and ethnic groups, although mortgage insurance alone is roughly 6% of total costs for Black and Hispanic FTHBs and LI FTHBs compared to 2% for white FTHBs and LI FTHBs. Overall, our findings suggest that nonmortgage housing costs are key areas that policymakers should focus on to reduce housing costs and foster sustained homeownership rates.
... As foreclosures mounted in the latter of half of the 2000s, the continuing history of the serial displacement (Saegert et al., 2011) of racial minorities and women had catastrophic repercussions including loss of wealth (Baker, 2014;Phillips, 2012) and negative health outcomes (Libman et al., 2012). Although the recovery from the Global Financial Crisis of 2007-2009 saw larger percentage gains for Black homeowners than White owners in some metro areas (Immergluck et al., 2019), this was offset in absolute dollars by the systemic devaluation of Black neighborhoods and property (Markley et al., 2020). And Black homeowners remain more likely to experience foreclosure than White homeowners (Lichtenstein et al., 2019). ...
Relying on market-based housing policies has been inadequate to meet the need for affordable and sustainable housing and has heightened disparities in the housing system, especially along lines of race and gender. Community land trusts (CLTs) promise more equitable ways of providing stable, secure, and affordable housing for those marginalized in market-based housing. Yet there has been limited research comparing CLT housing with mainstream tenures. Using data from the first sample survey of CLT owners (N = 216) that includes comparison groups of market owners (N = 142) and renters (N = 130) drawn from similar low- and moderate-income populations, we find that those who purchase CLT homes are similar demographically to renters but compared with market owners are more likely to be Black and from households headed by women. We find no difference between CLT and market-rate homeowners in terms of benefits often attributed to homeownership, specifically financial well-being, stability, and a sense of house as home. CLT owners report having more time and resources to pursue desired activities than do market owners. Despite their demographic similarity to CLT owners, renters fare worse on all of these dimensions. We conclude with policy recommendations for housing tenures that provide permanent affordability, greater social equality and greater democratic resident control.
... Specifically, the authors show that first-time Black homebuyers that purchased during the subprime period typically lost more than twice the wealth that White first-time homebuyers lost. Finally, in a study of 15 metropolitan areas, Immergluck, Earl, and Powell (2019) use HMDA data to study the recovery of home prices from 2012 to 2017. They report that Black and Latino homebuyers experienced higher house price appreciation than White homebuyers in strong housing markets and lower appreciation rates in weaker markets. ...
We use the U.S. Department of Housing and Urban Development’s Housing Choice Voucher program as a setting to evaluate the interaction of homeownership and race on the wealth accumulation of low-income households. Using a within-treatment difference-in-differences framework, we establish that low-income households that receive assistance in owning a home experience increased wealth accumulation relative to their tenure as renters. These wealth gains are not present among low-income minority households. Our findings provide evidence that homeownership is a driver of wealth formation for low-income households and that homeownership does not inherently reduce racial disparities in wealth.
... 58 The upshot was that during this window of opportunity to acquire single-family housing at historically cheap prices, black households accounted for an even smaller share of purchases than usual, and were concentrated primarily at the bottom end of the market-which large investors such as Blackstone, focused chiefly on middle-income suburbs, essentially spurned. 59 Meanwhile, credit constraints also hindered house-buying by small, buy-to-rent, "mom and pop" landlords. Indeed, Blackstone, ever the opportunist, took advantage of precisely this squeeze on lending to such actors by launching in July 2013 its own mortgage business to cater specifically to their demand for finance-B2R (Buy to Rent) Finance. ...
Having historically been avoided by institutional financial investors, U.S. single-family housing—that is, free-standing residential property—received large investment inflows after the global financial crisis of 2007-2009 to rapidly become a substantial asset class. Why? And why then? The materialization of an unprecedented investment opportunity—large stocks of cheap, favorably located urban housing—was certainly pivotal. But the attractiveness of that opportunity was enhanced by a series of parallel and (for investors) propitious historical shifts in four key realms: technology, finance, housing supply, and ideas. In short, the investment transformation that occurred was “overdetermined.” The article develops this argument with a focus on investment by the firm that led the way: the Blackstone Group.
... Efforts to mitigate the effects of all of these discriminatory practices have yielded some positive results for Black communities. For example, after the Great Recession, Black homebuyers were found to have higher appreciation rates than whites in high-and medium-appreciation metropolitan areas (Immergluck et al. 2019). However, this was not the case in low-appreciation areas. ...
... More recently, however, in the wake of the mortgage crisis, Immergluck, Earl and Powell (2019) found that Black homebuyers purchasing in 2012 generally saw greater appreciation over the 2012 to 2017 recovery period than did white buyers, particularly in metros that experienced medium or high levels of overall appreciation. Recent accelerations in gentrification in strongmarket cities may be one potential contributor to such patterns. ...
We examine the segregation of homebuying by Blacks and Latinos in the 50 largest U.S. metropolitan areas in 2017. We measure the extent to which Blacks and Latinos purchase homes in neighborhoods of different racial compositions. We calculate how much Black and Latino homebuyers purchase in majority-Black or majority-Latino neighborhoods as well as their segregation across these metros. Finally, we examine how metropolitan housing market factors affect the probability that Black and Latino homebuyers purchase homes in majority-Black or majority-Latino neighborhoods, respectively. We find that: 1) most Black and Latino buyers do not buy in majority-Black or majority-Latino neighborhoods; 2) that Black homebuying patterns tend to be more segregated than those of Latinos; and 3) that greater housing affordability and less income-based segregation is associated with lower levels of segregated homebuying for Latinos but not as much for Blacks. We discuss implications for fair housing policy and practice.
... Thus, even when Black Americans achieve exceptional racial integration, their precarious hold on wealth is eroded by the effect of three recent forces: first, predatory products and discriminatory practices; second, the worst local home price crashes of the most devastating housing crisis since the Great Depression; and, third, a belated and flawed government response to homeowner mortgage distress that likely widened, rather than narrowed, racial wealth gaps (Fraser and Oakley 2015;Immergluck 2015;Rugh 2019b;Schuetz et al. 2015). In sum, as Elizabeth Korver-Glenn (2018, p. 628) argues, "compounding inequalities" perpetuate the cycle of lost housing wealth (Fig. 1), from algorithmic racial bias, appraisal, marketing, searching, mortgage lending, foreclosure, relocation, and home price changes (Benjamin 2019; Besbris et al. 2015;Hwang 2019;Immergluck et al. 2019;Krysan and Crowder 2017;Raymond et al. 2016;Sewell 2016;Squires 2017;Sharp and Hall 2014;Steil et al. 2018;Sullivan 2017;Noble 2018). ...
Recent scholarship across various disciplines since the U.S. housing crisis of 2008 has deepened our understanding of racial wealth gaps, especially as it pertains to housing. This article focuses on two less-developed dimensions of Black and Latino home ownership, voting and immigration, respectively. The Black home ownership rate has fallen to 41% as of 2019, the lowest level since the 1968 Fair Housing Act. I contend that the continued decline of Black home ownership reduces voting turnout. A multivariate fixed effects analysis of state-level Black voter turnout in presidential elections since 2000 lends support to this contention. In contrast, the Latino home ownership rate has rebounded, climbing to nearly 48% in 2019. I argue that this rise is as much a mirage as sign of progress—an artifact of the deportation of millions of Latin Americans and the end of undocumented Mexican migration. Such changes inflate Latino ownership rates by reducing the denominator rather than increasing the numerator of homeowners. Examining state-level data, my multivariate analysis shows that the decline in the undocumented population and, to a lesser extent, the increase of DACA recipients explain the level and change in Latino ownership more than the change in the share of Latino citizens or documented non-citizens. I conclude that the color line has reinforced a new Black/non-Black divide in home ownership that undermines the social mobility and electoral representation of Black Americans. Meanwhile, a tri-racial divide by legal status and race stratifies Latino home ownership. Intra-Latino inequality masquerades as success because of the expulsion of vulnerable Latino immigrants and their US citizen children. The social consequences distort the home ownership rate calculation and pose another threat to multiracial democracy.
Housing and residential outcomes in the United States are significantly stratified by ethnoracial group, but the extent to which disparities exist in affordable renting over time is less clear. In this study, I explore affordable housing disparities among White, Black, Hispanic, and Asian renters and test hypotheses regarding variation by education, local ethnoracial composition, and chosen measurement of affordability. Chiefly, I find that White households have higher rates of affordable housing than Black and Hispanic households with disparities remaining nearly identical between 2005 and 2019 and become larger when considering household's ability to afford other basic needs. Nevertheless, returns to education are not uniformly larger for White renters, in that Black and Asian renters experience larger marginal increases in residual income based affordable housing at higher levels of education. The effects of county ethnoracial composition effects are consistent with all groups—including White households—experiencing declining affordability when living in counties with large coethnic populations.
Throughout the 20th century, housing movements in Atlanta were anchored by public housing tenant associations and a politics that materially and spatially addressed intersectional issues of discrimination in employment, welfare, education, and housing. I argue the strategies and outcomes of these movements collectivised, embedded, and placed Anneli Anttonen and Jorma Sipilä’s “care capital”—or an expansion of resources for care—in bell hooks’ “homeplaces”, for those marginalised both in social welfare policies and urban politics. Following the loss of over 7,000 public housing units in Atlanta, tenant associations’ care politics and the residents served were displaced and disembedded from the revitalised city. Using archival data, semi‐structured individual and group interviews, and observation of tenant organising meetings, this work examines how care politics are materially and spatially situated across housing movement geographies through Black resistance strategies to collectivise and embed care capital for a broader public.
Redlining occurs when financial institutions refuse to serve particular neighborhoods, often based on their racial and ethnic composition. Maps like those infamously created by the New Deal’s Home Owners’ Loan Corporation in the Great Depression rated and color-coded neighborhoods, assigning red to those considered the greatest credit risk. The Community Reinvestment Act (CRA) was passed in 1977 to combat the legacy and practice of redlining. However, we find neighborhoods rated declining or hazardous in the 1930s are still associated with worse economic conditions eight decades later. Moreover, although we find evidence that CRA encourages local banks and thrifts to lend to lower income borrowers, we find no difference in the market share of CRA-regulated lenders in lower income neighborhoods. In fact, these institutions lag the market in historically redlined neighborhoods.
In the decade leading up to the US housing crisis, black and Latino borrowers disproportionately received high-cost, high-risk mortgages—a lending disparity well documented by prior quantitative studies. We analyse qualitative data from actors in the lending industry to identify the social structure though which this mortgage discrimination took place. Our data consist of 220 depositions, declarations and related exhibits submitted by borrowers, loan originators, investment banks and others in fair lending cases. Our analyses reveal specific mechanisms through which loan originators identified and gained the trust of black and Latino borrowers in order to place them into higher cost, higher risk loans than similarly situated white borrowers. Loan originators sought out lists of individuals already borrowing money to buy consumer goods in predominantly black and Latino neighbourhoods to find potential borrowers, and exploited intermediaries within local social networks, such as community or religious leaders, to gain those borrowers’ trust.
We use zip-code-level home value data and cluster analysis to define three types of neighborhood housing markets in the Atlanta region based on their levels of volatility and stability before, during, and after the housing crisis. We identify the demographic and housing market characteristics of each of these clusters and use multivariate analysis to measure their predictive association with the neighborhood types. We also examine factors that predict long-term price appreciation over the 2001–2014 period. One key finding is that many black neighborhoods exhibited steep rates of price decline with only little recovery following the crisis. Meanwhile, many predominantly white, middle- and upper-income neighborhoods generally more than recovered from any housing price declines. The findings suggest that the legacies of the mortgage crisis may have long-lasting implications for housing wealth inequality and housing markets. Implications include a call for a renewed commitment to fair housing, community reinvestment, and equitable housing finance policies to support more evenness in recovery.
This article presents a number of key findings from a review of the data that mortgage lending institutions reported for 2010 under the Home Mortgage Disclosure Act (HMDA). The article documents home-purchase lending activity reflected in the HMDA data and discusses how the ending of the government's first-time homebuyer tax credit program during the year may have affected such lending. It also documents refinance lending activity and explores factors that may have muted such lending during 2010. In addition, the article closely examines patterns of lending across different racial or ethnic and income groups and across areas that differ in terms of housing market distress. Finally, it describes the federal government's role in the mortgage market over the past several years and investigates how upcoming changes in loan limits might affect this role and the mortgage market going forward.
This article provides an overview of the 2013 data reported under the Home Mortgage Disclosure Act of 1975 (HMDA) and documents mortgage market activity over time as well as lending patterns across different demographic groups and lender types. In addition, we use a unique data set composed of HMDA records matched to borrowers' credit records to reexamine the factors that might help explain the large differences in the incidence of higher-priced lending across borrowers of different races and ethnicities during the housing boom.
This paper examines racial and ethnic differences in high-cost mortgage lending in seven diverse metropolitan areas from 2004 to 2007. Controlling for credit score and other risk factors, African American and Hispanic borrowers are 103% and 78% more likely to receive high-cost mortgages for home purchases. A large part of the increase is attributable to sorting across lenders (55%-65%), and this, in turn, can be largely accounted for by the lender’s ex post foreclosure risk. The remaining within-lender differences are also concentrated in high-risk lenders, revealing the central role of these institutions in explaining market-wide racial and ethnic differences. (JEL G21, I28, J15, J71, R21).
For decades, it was taken as a given that an increased homeownership rate was a desirable goal. But after the financial crises and Great Recession, in which roughly eight million homes were foreclosed on and about $7 trillion in home equity was erased, economists and policymakers are re-evaluating the role of homeownership in the American Dream. Many question whether the American Dream should really include homeownership or instead focus more on other aspects of upward mobility, and most acknowledge that homeownership is not for everyone. We take a detailed look at US homeownership from three different perspectives: 1) an international perspective, comparing US homeownership rates with those of other nations; 2) a demographic perspective, examining the correlation between changes in the US homeownership rate between 1985 and 2015 and factors like age, race/ethnicity, education, family status, and income; 3) and, a financial benefits perspective, using national data since 2002 to calculate the internal rate of return to homeownership compared to alternative investments. Our overall conclusion: homeownership is a valuable institution. While two decades of policies in the 1990s and early 2000s may have put too much faith in the benefits of homeownership, the pendulum seems to have swung too far the other way, and many now may have too little faith in homeownership as part of the American Dream.
I analyze neighborhoods with persistent negative equity in the Southeast to understand whether persistent negative equity can be explained by the same factors that led to the crash or whether dynamics during the recovery period are more relevant. Negative equity is high in the Southeast and concentrated in urban areas. In a series of regressions, I evaluate the contribution of income, commute times, unemployment, housing stock quality, vacancy rates, mortgage market factors, and racial/ethnic composition to rates of negative equity. I also provide within-state and within-metropolitan estimates. I find that even after controlling for subprime lending, the severity of the housing market crash, and other factors, the places with persistent high negative equity are in predominantly Black ZIP codes. Other correlates with persistent negative equity are longer commute times, higher unemployment rates, and high rental vacancy rates. Even after controlling for factors relating to the housing market crash, race remains the strongest predictor of persistent negative equity. This finding indicates that though subprime lending and the foreclosure crisis exacerbated racial and spatial inequality, the recovery itself has also been uneven and has proceeded in a way that widens the racial gap in housing wealth. To further explore the dynamics of the recovery, I provide preliminary evidence that recovery efforts like refinances of Home Affordable Refinancing Program–eligible loans were less likely to be performed in predominantly Black neighborhoods.
Data from the newly released 2016 Survey of Consumer Finances show wealth has grown for families across race and ethnicity groups since 2013, but substantial disparities between groups persist.
The impacts of the foreclosure crisis have been widespread, catalyzing the worst economic downturn since the Great Depression and leading to dramatic declines in housing equity and wealth. However, Black and Hispanic households and communities have been disproportionately affected by the crisis, contributing to a tightening of credit standards and a retrenchment of lending in these communities. This study uses a unique, national data set of purchase mortgages originated between 2004 and 2007 to examine the racial and ethnic dimensions of subprime lending practices that were prevalent during the boom and explores the role that these lending practices had on subsequent rates of default. This study thus contributes to the debate on the causes of the housing crisis and its implications for racial inequality in America.
During the past decade, housing markets across the United States experienced dramatic upheaval. Housing prices rose rapidly throughout much of the country from 2000 until the start of 2007 and then fell sharply during the next 2 years. Many households lost substantial amounts of equity during this downturn; in aggregate, U.S. homeowners lost $7 trillion in equity from 2006 to 2009. Aggregate home equity holdings had fallen back to 2000 levels by early 2009. Whereas this intense volatility has been well documented, there remain unanswered questions about the variation in experiences across racial groups, particularly among those who purchased their homes before the boom and kept them through the collapse of the market. Did this housing market upheaval widen the already large racial and ethnic gaps in housing wealth? Using the American Housing Survey, we analyze differences in the changes in home equity experienced by homeowners of different races and ethnicities between 2003 and 2009. We focus on homeowners who remained in their homes over this period, and find that blacks and Hispanics gained less home equity than whites and were more likely to end the period underwater. Black–white gaps were driven in part by racial disparities in income and education and differences in types of homes purchased. Latino–white disparities were most dramatic during the market’s bust.
We use the Panel Study of Income Dynamics to estimate how net worth was affected among low- and moderate-income households who became first-time homebuyers at different points during the volatile 2000s. We address selection using propensity score matching and estimating difference-in-difference models, and use quantile regressions to account for the skew in net worth outcomes. Results highlight the significance of race in the relationship between first-time home buying and net worth during the decade. Although timing was critical to the short-term trajectory of net worth for whites, total net worth declines for black first-time homebuyers regardless of economic climate. The most dramatic differences between black and white new homebuyers is their neighborhood locations, with blacks purchasing in predominantly black neighborhoods with lower housing prices and price appreciation, and lower and declining rates of homeownership.
The recent housing crisis's devastating effects on U.S. households’ economic situations provides reason to examine the risks, pitfalls and assumptions underlying contemporary housing policy. This paper examines issues associated with renting and owning housing in America. It argues that housing operates as (1) a dimension of the U.S. system of stratification, (2) a method for the unfair distribution of resources in metropolitan space, and (3) a mechanism for the construction of the “other” and as a vehicle for social exclusion. Homeownership restricts people to homogeneous neighborhoods, renders low-income families and renters of all types unacceptable, makes neighborhoods fertile ground for learning who is socially undesirable, breeds class-based distinctions, and puts people in financially risky situations. Rethinking questions about renting and owning may allow consideration of how housing can play a more constructive role in pursing economic opportunities, redistribution and social and economic justice in America.
This paper examines the types of neighborhoods that black and white homebuyers have secured loans in during the recent housing
boom and subsequent bust. We expand upon and refine previous research on locational attainment using loan-level data from
the 1992–2010 Home Mortgage Disclosure Act (HMDA) combined with tract- and metropolitan-level data from the 1990, 2000, and
2010 Census and the American Community Survey. Multilevel models show that black homebuyers are moving into considerably more
racially segregated neighborhoods than their white counterparts and that their access to “whiter” neighborhoods did not expand
during the housing boom, even after controlling for the racial composition of the metropolitan area and other key ecological
factors. Conversely, new white homebuyers have been moving into neighborhoods with greater percent black residents, which
may be a contributing factor in observed declines in segregation during the past few decades. Additionally, black homebuyers
in metropolitan areas with greater suburban growth were on average accessing homes in more integrated neighborhoods. Finally,
the models explained considerably more of the variation in the neighborhood racial composition of whites compared to blacks.
These findings are suggestive of a dual housing market, one in which the experiences of blacks are still systematically different
than those of whites, despite expanded access to homeownership.
Using data from a set of low- and moderate-income homeowners who received prime mortgages through the Community Advantage Program panel and a matched set of renters, we assess the effect of sustained homeownership on net worth and components of net worth. In this article, our aim is to test the claim that, all else being equal, investing in and maintaining ownership of a home yield higher short-term increases in net worth and other measures of economic well-being than do renting and choosing other forms of investment and consumption. We attempt to isolate the effect of homeownership from the factors that cause both homeownership and increases in wealth using three matching approaches that address sample selection and endogeneity in the data. After balancing renters and owners on observed characteristics and adjusting for influential outlying cases, we find that low- and moderate-income homeowners experience greater short-run increases in net worth, assets, and nonhousing net worth than renters do. These findings are particularly interesting because the period of study coincides with the housing crisis, periods of shrinking home values, and declining equity in the housing market as a whole.
As homeownership has been expanding in the United States over the past several decades, residential segregation between blacks and whites has been declining in most metropolitan areas. However, the degree to which the residential patterns of new homebuyers have mirrored these overall trends in segregation and how the massive increase in home buying has related to changes in segregation has remained largely unexplored. This paper examines the segregation of new black homebuyers from white households, new white homebuyers from black households, and black and white households from each other using Home Mortgage Disclosure Act (HMDA) data from 1992 to 2010 merged with data from the Census and ACS. I find that black homebuyers are less segregated from white households than black homeowners overall and black households in general, providing evidence in support of the spatial assimilation model that would predict better outcomes for homeowners. Also consistent with the spatial assimilation perspective, I found in the multivariate models that increased income parity between blacks and whites and growth in black lending are associated with average declines in black/white household segregation from 1990 to 2010. Although subprime lending was not associated with overall changes in segregation, metropolitan areas with higher percentages of loans to blacks from subprime lenders experienced increases in segregation of both black homeowners from white households as well as white owners from black households.
This article questions why the Left, the Right, the U.S. Government, and the financial services industry all love homeownership. The article considers the dramatic transformation of the U.S. labor market over the last 30 years and the current state of the U.S. housing market then considers whether the assumption that homeownership is good for blacks and Latinos remains sound. The article argues that blacks and Latinos have never received the full financial and noneconomic benefits homeownership generally provides to individual homeowners. After observing that blacks and Latinos have always faced obstacles when they attempted to buy homes, the article shows how these groups have been especially harmed in the current housing crisis. The article suggests that until these two groups can become more competitive actors in housing markets, they generally should avoid buying a house.
This paper solves a dynamic model of a household's decision to default on its mortgage, taking into account labor income, house price, inflation, and interest rate risk. Mortgage default is triggered by negative home equity, which results from declining house prices in a low inflation environment with large mortgage balances outstanding. Not all households with negative home equity default, however. The level of negative home equity that triggers default depends on the extent to which households are borrowing constrained. High loan-to-value ratios at mortgage origination increase the probability of negative home equity. High loan-to-income ratios also increase the probability of default by tightening borrowing constraints. Comparing mortgage types, adjustable-rate mortgage defaults occur when nominal interest rates increase and are substantially affected by idiosyncratic shocks to labor income. Fixed-rate mortgages default when interest rates and inflation are low, and create a higher probability of a default wave with a large number of defaults. Interest-only mortgages trade off an increased probability of negative home equity against a relaxation of borrowing constraints, but overall have the highest probability of a default wave.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
At various points in its history, the Federal Housing Administration (FHA) has had particularly large impacts on mortgage and housing markets in the United States. During the early to middle 2000s, FHA lending dwindled to historically low shares of the mortgage market as subprime lending boomed, with some questioning the need for the agency's continued existence. After the subprime crisis in 2007 and pullbacks by conventional lenders, however, the FHA played one of its historic roles—the mortgage lender of last resort—and its lending surged, reaching approximately 40% of home purchase lending by the end of 2008, a level not seen since World War II. This article examines the differences in FHA activity across and, especially, within U.S. metropolitan areas in late 2008, a peak period of the crisis. The focus is on loans with moderate loan-to-value ratios, among which FHA status varies the most. Factors that affect the likelihood of such loans being FHA-insured include credit score, regional housing price trends, neighborhood demographics (including racial composition), and a variety of other factors. Controlling for many other loan-level and zip code characteristics, the odds of a loan being FHA-insured increase substantially when going from a predominantly white to an otherwise similar predominantly black zip code.
Thesis (Ph. D.)--University of Washington, 2004 Homeownership is deeply entrenched within the national conception of success and social mobility, and government housing policy in recent years has focused on promoting homeownership opportunities for low-income and minority families. However, we do not know to what extent low-income and minority families benefit from owning a home. My dissertation addresses this knowledge gap and explores the homeownership experiences of low-income families. I ask three inter-related questions. First, who among low-income renters becomes a homeowner? Second, where do low-income homeowners live? Third---and most importantly---does homeownership contribute to social mobility and financial security for low-income families? I approach these questions both qualitatively and quantitatively. The qualitative component entails 55 in-depth interviews with low-income families who bought homes between 1997 and 2002 in Seattle, Washington. The quantitative analysis uses the longitudinal Panel Survey on Income Dynamics (PSID) to analyze national level trends in low-income homeownership. The dissertation contributes to our theoretical understanding of the links between housing tenure and class as well as to our empirical understanding of the dynamics of homeownership among low-income families.The analysis reveals that the benefits of homeownership are not evenly distributed across either class or race, and that more attention needs to be paid to differences among homeowners. The research shows that the ability to afford a mortgage and to remain in homeownership is dependent upon a steady income flow, and that low-income families may be particularly vulnerable to losing their homes if they are working in low-paid or unstable jobs. In addition, low-income households do not gain as much from owning a home as higher income households. Minorities may benefit the least from the advantages of owning a home: they experience less appreciation in house values, accumulate less housing wealth, and see fewer neighborhood improvements over time than their white counterparts. I conclude that homeownership as a housing and asset accumulation strategy for the poor will fail unless policy-makers also address the underlying class and racial inequalities that persist in shaping social stratification in the United States.
Toxic transactions: how land installment contracts once again threaten communities of color
- J Battle
- S Mancini
- M Saunders
- O Williamson
Battle, J., Mancini, S., Saunders, M., and Williamson, O. 2016. Toxic transactions: how land
installment contracts once again threaten communities of color. Washington, DC: National
Consumer Law Center, https://www.nclc.org/issues/toxic-transactions-threaten-communities-ofcolor.html.
Wealth Accumulation and Homeownership.” U.S. Department of Housing and Urban Development
- Boehm Thomas
- Schlottmann Alan
Boehm, T. and Schlottmann, A. 2004. Wealth Accumulation and Homeownership. U.S. Department
of Housing and Urban Development. December.
https://www.huduser.gov/publications/pdf/wealthaccumulationandhomeownership.pdf.
Insufficient funds: Savings, assets, credit, and banking among low-income households
- R Bostic
- K Lee
Bostic, R. and Lee, K. 2009. Homeownership: America's Dream. In Blank, R. and Barr, M., eds.
Insufficient funds: Savings, assets, credit, and banking among low-income households. Russell Sage Foundation,
pp. 218-256.
Local House Price Dynamics: New indices and Stylized Facts.” Working Paper 16-01. Federal Housing. Finance Agency
- Bogin Alexander
- Doerner William
- Larson William
Bogin, A., Doerner, W., Larson, W. 2016. Local house price dynamics: New indices and stylized
facts. Working Paper 16-0. Federal Housing. Finance Agency. June.
Federal Reserve Surveys of the Economic Well-Being of US Households: SCF and SHED.” Urban Institute
- Bucholz David
- Larrimore Jeff
- Thompson Jeff
Bucholz, D., Larrimore, J., and Thompson, J. 2016. Federal Reserve surveys of the economic wellbeing of US households: SCF and SHED. Urban Institute. January 21.
https://www.urban.org/sites/default/files/urban_institute_data_talk_scf_shed_combinedv2.pdf
Homeownership and the Racial Wealth Divide.”Housing Perspectives. Federal Reserve Bank of St
- Emmons William
Emmons, W. 2017. Homeownership and the racial wealth divide. Housing Perspectives. Federal Reserve
Bank of St. Louis. July. https://www.stlouisfed.org/~/media/Publications/Housing-Market-Perspectives/2017/Issue-5/HMP_issue5_web2.pdf.
Preventing the next mortgage crisis: The meltdown, the federal response, and the future of housing in America
- D Immergluck
Immergluck, D. 2015. Preventing the next mortgage crisis: The meltdown, the federal response, and the future
of housing in America. Rowman and Littlefield.
Where have all the small loans gone? Urban Institute
- E Seidman
- B Bai
Seidman, E. and Bai, B. 2016. Where have all the small loans gone? Urban Institute. April 18.
https://www.urban.org/urban-wire/where-have-all-small-loans-gone.
The Roots of the Widening Racial Wealth Gap: Explaining the Black-White Economic Divide
- Shapiro Thomas
- Meschede Tatjana
- Osoro Sam
Shapiro, T., Meschede, T., and Osoro, S. 2013. The roots of the widening racial wealth gap:
Explaining the Black-white economic divide. Waltham, MA: Institute on Assets and Social Policy,
Brandeis University. https://iasp.brandeis.edu/pdfs/Author/shapiro-thomasm/racialwealthgapbrief.pdf.
Housing Finance at a Glance: Monthly Chartbook
- Urban Institute
Urban Institute. 2016. Housing finance at a glance: Monthly chartbook. June.
https://www.urban.org/sites/default/files/publication/81726/2000832-Housing-Finance-at-a-Glance-A-Monthly-Chartbook-June-2016.pdf
Wealth Accumulation and Homeownership.” U.S. Department of Housing and Urban Development
- Boehm Thomas Andalanschlottmann
Local House Price Dynamics: New indices and Stylized Facts.” Working Paper 16-01. Federal Housing. Finance Agency
- Bogin Alexander Williamdoerner Andwilliamlarson
Federal Reserve Surveys of the Economic Well-Being of US Households: SCF and SHED
- Bucholz David Jefflarrimore Andjeffthompson
Housing Vacancy Survey Report. Enterprise Community Partners
- Drew Rachel
The Roots of the Widening Racial Wealth Gap: Explaining the Black-White Economic Divide
- Shapiro Thomas Tatjanameschede
SCF chartbook. Federal Reserve Board
- Federal Reserve
- Board
Federal Reserve Board. 2017. SCF chartbook. Federal Reserve Board. October 17.
https://www.federalreserve.gov/econres/files/BulletinCharts.pdf.
Diversity and disparities
Spatial Structures in the Social Sciences. 2018. Diversity and disparities. Brown University.
https://s4.ad.brown.edu/projects/diversity/SegSorting/Default.aspx.