The Determinants of Racial Disparities in Housing Returns
Abstract/Contents
- Abstract
- We identify the existence of a racial gap in housing returns that is an order of magnitude larger than disparities arising from housing costs alone. The returns gap is driven almost entirely by differences in distressed home sales (i.e. foreclosures and short sales). Black and Hispanic homeowners are both more likely to experience a distressed sale and to live in neighborhoods where distressed sales carry larger foreclosure discounts. Higher rates of distressed sales among minorities are driven by pre-existing differences in economic stability and neighborhood sorting. Black and Hispanic homeowners are more likely to default in response to increases in monthly payments, consistent with racial differences in liquid wealth holdings playing a key role in creating the observed disparities. We use quasi-experimental variation in the receipt of mortgage modifications to show that policies that encourage lenders to modify loans when homeowners can no longer afford their mortgages can mitigate gaps in housing returns, particularly if they are targeted towards minority homeowners or neighborhoods.
Description
| Type of resource | text |
|---|---|
| Date created | September 10, 2021 |
Creators/Contributors
| Author | Kermani, Amir |
|---|---|
| Author | Wong, Francis |
| Organizer of meeting | Diamond, Rebecca |
| Organizer of meeting | van Dijk, Winnie |
| Organizer of meeting | Schneider, Martin |
| Organizer of meeting | Tsivanidis, Nick |
Subjects
| Subject | economics |
|---|---|
| Genre | Text |
| Genre | Working paper |
| Genre | Grey literature |
Bibliographic information
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- License
- This work is licensed under a Creative Commons Attribution 4.0 International license (CC BY).
Preferred citation
- Preferred citation
- Kermani, A. and Wong, F. (2022). The Determinants of Racial Disparities in Housing Returns. Stanford Digital Repository. Available at https://purl.stanford.edu/xn054sv6182
Collection
SITE Conference 2021
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