Crossing the Color Line in the 21st Century: Mortgaging Increasingly Diverse Neighborhoods

Abstract

Mortgage capital remains key to accessing the best neighborhoods and public services, as well as building wealth among lower-income Americans; yet we know little about how increasing diversity impacts mortgage outcomes. For the top 100 metropolitan areas, pre and post-recession mortgage applications are examined to isolate temporal market shifts related to well-established economic and policy developments. No relationship is found between increases in black neighbors and mortgage approval in the post-recession sample, an improvement over pre-recession. No relationship was found between increases in Hispanic neighbors and mortgage outcomes pre-recession, but Hispanic neighborhood growth correlated with decreased mortgage approval post-recession. An increase in Asian neighbors decreased mortgage approval during both years, at a relatively constant rate. Overall, results offered little support for traditional theories of neighborhood racial-ethnic change such as tipping points that posit black racial change would be most detrimental to mortgage approvals. Rather, results demand new avenues for research into racial change as we seek to understand wealth accumulation in an increasingly diverse America. The lack of significance between increases in black neighbors and mortgage approval suggests that Du Bois’ color line may have been permeated. However, continued multidimensional improvements in the socioeconomic status of minorities are necessary for access to mortgage capital to present a tangible solution that begins to close racial wealth gaps.

Keywords: racial change, economic mobility, inequality, wealth, housing

JEL Classification: J18, H3, G21