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Racial Disparities in Housing Returns

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  • Amir Kermani
  • Francis Wong

Abstract

We show that higher rates of distressed home sales (i.e., foreclosures and short sales) among Black and Hispanic homeowners severely reduce realized housing returns for these groups—in particular, to a level below that realized by White homeowners. Yet absent financial distress, houses owned by minorities do not appreciate at substantially slower rates than houses owned by nonminorities. Racial differences in liquidity and income stability, which are imperfectly observed by lenders, are important determinants of differences in distress. Policies that prevent foreclosure among distressed minorities can mitigate the racial gap in returns.

Suggested Citation

  • Amir Kermani & Francis Wong, 2026. "Racial Disparities in Housing Returns," American Economic Review, American Economic Association, vol. 116(1), pages 287-331, January.
    • Handle: RePEc:aea:aecrev:v:116:y:2026:i:1:p:287-331
    DOI: 10.1257/aer.20240327
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    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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