Racial and Ethnic Differences in the Financial Returns to Home Purchases from 2007 to 2020

Racial Disparities in Housing Returns

“…Specifically,Kahn (2021) computes returns for each racial group using a shift-share approach that takes weighted averages of county-and zip code-specific returns computed using Zillow's Home Value Indices. Weights correspond to the share of homeowners of a particular racial group who purchase homes in a given location.…”

Racial Disparities in Housing Returns

“…Another strand of this literature documents racial disparities in house price appreciation (Flippen 2004;Anacker 2010;Faber and Ellen 2016;Sakong 2020;Kahn 2021). We contribute to this literature by showing that analyzing neighborhood-level differences in house price appreciation (and thus ignoring distressed sales) greatly underestimates differences in realized housing returns by race.…”

“…Our estimates of the racial gap in returns among regular sales within location and years (Figure 1, Panel B) are comparable to estimates in other studies that have analyzed local house price indices. Kahn (2021) studies racial differences in housing returns using house price indices from Zillow and finds that Black homeowners earn slightly lower returns than the average homeowner, while Hispanic homeowners earn higher returns than average. 14 Our results indicate that using local-level indices to compare differences in housing returns among groups can result in misleading comparisons because they do not capture differences in distressed sales.…”

“…Previous work has typically measured housing returns based on neighborhood-level house price appreciation (e.g. Anacker 2010;Kahn 2021) or homeowner self-reports of home value (e.g. Flippen 2004;Faber and Ellen 2016).…”

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“…12 A number of studies examine the relationship between race and transition into homeownership (Boehm and Schlottmann, 2004;Dawkins, 2005;Hall and Crowder, 2011), while others focus on the forces that drive large unconditional minority-White gaps in homeownership rates, such as income, wealth, age, family structure and location (Coulson and Dalton, 2010;Deng, Ross, and Wachter, 2003;Gabriel and Painter, 2003;Gabriel and Rosenthal, 2005;Gyourko, Linneman, and Wachter, 1999;Hilber and Liu, 2008). Another stream of research investigates racial differences in home equity and financial returns to homeownership (Flippen, 2004;Kahn, 2021;Kermani and Wong, 2021;Krivo and Kaufman, 2004). We study a related, but distinct question: after transitioning into homeownership, are there racial differences in the ability to access (and the cost of accessing) housing wealth via MEW products?…”