The Transition to Home Ownership and the Black-White Wealth Gap
Abstract
This paper analyzes differences in the likelihood that black and white families become homeowners. By following a sample of black and white renters over time, we are able to separately study racial differences in the likelihood of applying for a mortgage and in the likelihood that a mortgage application is accepted. Although its effect on the race gap in housing transitions is small, we find strong evidence that black applicants are almost twice as likely as comparable white households to be rejected, even when credit history proxies and measures of household wealth are accounted for. We show that the housing transition gap exists primarily because blacks are less likely to apply for mortgages in the first place. The analysis suggests that differences in income, family structure, and in the ability and willingness of parents to provide down-payment assistance are the primary reasons for this applications gap. We speculate that the portion of the gap that remains unexplained after controlling for income, demographics, and wealth may be the result of blacks anticipating a greater chance of rejection when they apply for mortgages.
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African-Americans transition to homeownership more slowly, own lower-value homes, have less housing equity, and exit homeownership at higher rates than whites.
“Compared to whites, African-Americans have substantially lower rates of homeownership, transition to homeownership more slowly, own homes of lower values, have less housing equity, and exit homeownership at higher rates; these differences generally persist even after adjusting for race differences in other characteristics (Charles & Hurst 2002, Flippen 2001, Keister 2000, 2004; Killewald & Bryan 2”
From Wealth Inequality and Accumulation (2017) · cites this paper as Charles & Hurst 2002
Race differences in social origins, including family structure, parental and extended family economic position, and inheritances, contribute to the black-white wealth gap and to whites' higher homeownership rates.
“Race differences in social origins, including family structure, the economic position of parents and extended family members, and inheritances, also contribute to the black-white wealth gap and to whites’ higher rates of homeownership (Avery & Rendall 2002, Charles & Hurst 2002, Conley 2001a, Gittleman & Wolff 2004, Hall & Crowder 2011, McKernan et al. 2014, Menchik & Jianakoplos 1997).”
From Wealth Inequality and Accumulation (2017) · cites this paper as Charles & Hurst 2002
Cites
Golden eggs and hyperbolic discounting
Laibson, D. (1997) · The Quarterly Journal of Economics · doi:10.1162/003355397555253 · Cited by 6,122 · see citing works
The measurement and structure of household wealth
Juster, F. T., Smith, J. P., & Stafford, F. (1999) · Labour Economics · doi:10.1016/s0927-5371(99)00012-3 · Cited by 275 · see citing works
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Golden eggs and hyperbolic discounting
Laibson, D. (1997) · The Quarterly Journal of Economics · doi:10.1162/003355397555253 · Cited by 6,122 · see citing works
Wealth Inequality and Accumulation
Killewald, A., Pfeffer, F. T., & Schachner, J. N. (2017) · Annual Review of Sociology · doi:10.1146/annurev-soc-060116-053331 · Cited by 469 · see citing works
“…African Americans in lending markets for homes, vehicles, and businesses (Blanchflower et al. 2003, Cavalluzzo & Wolken 2005, Charles et al. 2008, Charles & Hurst 2002, Oliver & Shapiro 2006), including disproportionate rates of subprime mortgage loans among black households leading up to the…”
BackgroundInfluentialGeronimus, A. T., Hicken, M. T., Pearson, J. A., Seashols, S. J., Brown, K. L., & Cruz, T. D. (2010) · Human Nature · doi:10.1007/s12110-010-9078-0 · Cited by 447 · see citing works
Rates for Vehicle Loans: Race and Loan Source
Charles, K. K., Hurst, E., & Stephens, M. (2008) · American Economic Review · doi:10.1257/aer.98.2.315 · Cited by 108 · see citing works
Self-citationKillewald, A. (2013) · Demography · doi:10.1007/s13524-012-0190-0 · Cited by 92 · see citing works
- Authors
- Charles, K. K., & Hurst, E.
- Affiliations
- University of Michigan (US)
- University of Chicago (US)
- ORCID
- Hurst, Erik
- Venue
- Review of Economics and Statistics
- Publisher
- MIT Press - Journals
- Published
- 2002-05
- Volume
- 84
- Issue
- 2
- Pages
- 281-297
- ISSN
- 0034-6535 (ISSN-L)
- 1530-9142
- OpenAlex
- W1985300791
- Cited by
- 304
- References
- 2
- Citations by year
- 2026: 16 · 2025: 14 · 2024: 18 · 2023: 13 · 2022: 28 · 2021: 22 · 2020: 27 · 2019: 15 · 2018: 16 · 2017: 12 · 2016: 2 · 2015: 6 · 2014: 8 · 2013: 12 · 2012: 10
- FWCI
- 18.45
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- The Review of Economics and Statistics (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Housing Market and Economics
- Social Sciences › Sociology and Political Science › Urban, Neighborhood, and Segregation Studies
- Social Sciences › Economics, Econometrics and Finance › Finance › Housing, Finance, and Neoliberalism
- Keywords
- homeownership, racial disparities, Black-White wealth gap, mortgage applications, tenants, down payment assistance, credit history, household wealth, income, family structure, racial discrimination in lending
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