The Vulnerability of Minority Homeowners in the Housing Boom and Bust

39 Pages Posted: 3 May 2013 Last revised: 2 Feb 2015

Patrick J. Bayer

Duke University - Department of Economics; National Bureau of Economic Research (NBER)

Fernando V. Ferreira

University of Pennsylvania - The Wharton School

Stephen L. Ross

University of Connecticut - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: January 29, 2015

Abstract

This paper examines mortgage outcomes for a large, representative sample of individual home purchases and refinances linked to credit scores in seven major US markets in the recent housing boom and bust. Among those with similar credit scores and loan attributes, black and Hispanic homeowners had much higher rates of delinquency and default in the downturn. There is important heterogeneity within minorities: black and Hispanics that live in areas with lower employment rates and that have high debt to income ratios are the driving force behind the observed racial and ethnic differences in foreclosures and delinquencies. Moreover, these estimated differences are especially pronounced for loans originated near the peak of the housing boom even after controlling for the effect of origination timing on households’ equity position. These findings suggest that black and Hispanic homeowners drawn into the market near the peak were especially vulnerable to adverse economic shocks and raise concerns about homeownership as a mechanism for reducing racial disparities in wealth.

Suggested Citation

Bayer, Patrick J. and Ferreira, Fernando V. and Ross, Stephen L., The Vulnerability of Minority Homeowners in the Housing Boom and Bust (January 29, 2015). Economic Research Initiatives at Duke (ERID) Working Paper No. 145. Available at SSRN: https://ssrn.com/abstract=2260367

Patrick J. Bayer (Contact Author)

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
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National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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Fernando V. Ferreira

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States
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215-573-2220 (Fax)

HOME PAGE: http://real.wharton.upenn.edu/~fferreir/

Stephen L. Ross

University of Connecticut - Department of Economics ( email )

365 Fairfield Way, U-1063
Storrs, CT 06269-1063
United States
860-486-3533 (Phone)
860-486-4463 (Fax)

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