Racial Differences in Home Ownership and Home Equity Among Preretirement-Aged Households

Abstract

The problem of housing market discrimination and racial disparities in mortgage lending has taken on a new level of urgency ("Blacks, Hispanics Remain Most Likely to Be Denied Home Loans," 1992; Brenner, 1992; Zuckoff, 1992). Researchers and scholars, as well as federal officials, have begun to reexamine the underlying structures of mortgage and housing markets to understand the persistence of racial gaps in lending (Barefoot, 1992; Boston Federal Reserve, 1992; Myers & Chan, 1995). One particularly disturbing observation is that even during times when racial gaps in mortgage lending should have been narrowing — such as in 1992 when interest rates began an unprecedented nosedive below double-digit rates — the racial gaps persisted (Myers, 1994). Few minority individuals refinanced their loans during this period, even though loan refinancings became the most frequent form of mortgage loan during the period (Myers, 1994). Thus, not only were minority individuals less likely to obtain refinancings when they applied, they were less likely to apply. At least for middle-aged borrowers, the impact could be high debt levels carried into their retirement years. These high debt levels, along with low home ownership rates, may help explain the widely cited evidence of staggering net worth gaps between blacks and whites in America (Smith, 1993).

Keywords: racial differences, housing market discrimination, racial dispairities, home ownership, pre-retirement aged households