Socioeconomic and Racial Disparities in the Financial Returns to Homeownership

61 Pages Posted: 18 Apr 2015 Last revised: 18 Oct 2016

See all articles by Tom Mayock

Tom Mayock

UNC Charlotte; Government of the United States of America - Office of the Comptroller of the Currency (OCC)

Rachel Spritzer

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Date Written: October 11, 2016

Abstract

In this study we utilize data from over a million ownership spells between 1990 and 2013 in 9 metropolitan areas - Boston, Chicago, Detroit, Los Angeles, Miami, New York, Pittsburgh, San Diego, and San Francisco - to provide what we believe to be the most extensive analysis of the variation in the financial returns to homeownership along racial and socioeconomic dimensions. Holding constant a buyer's purchase price, property type, neighborhood, and purchase and sale timing, we find that capital gains have been systematically lower - and the real cost of ownership has been systematically higher - for low-income and minority home buyers in every market in our sample. In some cases, the unconditional returns realized by these buyers were higher, a phenomenon driven by their higher propensity to purchase lower-priced homes that experienced high levels of appreciation. Taken as whole, our findings call into question the widespread claim that encouraging homeownership for low-income and minority households is a panacea for addressing wealth inequality.

Keywords: Homeownership, Housing Returns, Racial Inequality, Wealth

JEL Classification: D31, R3

Suggested Citation

Mayock, Tom and Spritzer, Rachel, Socioeconomic and Racial Disparities in the Financial Returns to Homeownership (October 11, 2016). Available at SSRN: https://ssrn.com/abstract=2595471 or http://dx.doi.org/10.2139/ssrn.2595471

Tom Mayock (Contact Author)

UNC Charlotte ( email )

Charlotte, NC 28223
United States

Government of the United States of America - Office of the Comptroller of the Currency (OCC) ( email )

400 7th St Sw
Washington, DC 20219-0001
United States

Rachel Spritzer

Federal Reserve Banks - Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

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