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The Vulnerability of Minority Homeowners in the Housing Boom and Bust

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  • Patrick Bayer
  • Fernando Ferreira
  • Stephen Ross

Abstract

This paper examines mortgage outcomes for a large, representative sample of individual home purchases and refinances linked to credit scores in seven major US markets in the recent housing boom and bust. Among those with similar credit scores, black and Hispanic homeowners had much higher rates of delinquency and default in the downturn. These differences are not readily explained by the likelihood of receiving a subprime loan or by differential exposure to local shocks in the housing and labor market and are especially pronounced for loans originated near the peak of the boom. Our findings suggest that those black and Hispanic homeowners drawn into the market near the peak were especially vulnerable to adverse economic shocks and raise serious concerns about homeownership as a mechanism for reducing racial disparities in wealth.

Suggested Citation

  • Patrick Bayer & Fernando Ferreira & Stephen Ross, 2013. "The Vulnerability of Minority Homeowners in the Housing Boom and Bust," Working Papers 13-7, Duke University, Department of Economics.
  • Handle: RePEc:duk:dukeec:13-7
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    References listed on IDEAS

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Why so much policy focus on home ownership?
      by Economic Logician in Economic Logic on 2013-05-31 19:54:00

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    Cited by:

    1. Dougal, Casey & Gao, Pengjie & Mayew, William J. & Parsons, Christopher A., 2019. "What’s in a (school) name? Racial discrimination in higher education bond markets," Journal of Financial Economics, Elsevier, vol. 134(3), pages 570-590.
    2. Robert Bartlett & Adair Morse & Richard Stanton & Nancy Wallace, 2019. "Consumer-Lending Discrimination in the FinTech Era," NBER Working Papers 25943, National Bureau of Economic Research, Inc.
    3. Laurent Gobillon & Matthieu Solignac, 2015. "Homeownership of immigrants in France: selection effects related to international migration flows," Working Papers halshs-01233069, HAL.
    4. Marsha J. Courchane & Stephen L. Ross, 2019. "Evidence and Actions on Mortgage Market Disparities: Research, Fair Lending Enforcement, and Consumer Protection," Housing Policy Debate, Taylor & Francis Journals, vol. 29(5), pages 769-794, September.
    5. Anthony A. Defusco & John Mondragon, 2020. "No Job, No Money, No Refi: Frictions to Refinancing in a Recession," Journal of Finance, American Finance Association, vol. 75(5), pages 2327-2376, October.
    6. Jeffrey P. Cohen & Cletus C. Coughlin & Vincent W. Yao, 2016. "Sales of Distressed Residential Property: What Have We Learned from Recent Research?," Review, Federal Reserve Bank of St. Louis, vol. 98(3), pages 159-188.
    7. David Arnold & Will Dobbie & Crystal S. Yang, 2017. "Racial Bias in Bail Decisions," NBER Working Papers 23421, National Bureau of Economic Research, Inc.
    8. Durba Chakrabarty & Michael J. Osei & John V. Winters & Danyang Zhao, 2019. "Which immigrant and minority homeownership rates are gaining ground in the US?," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 43(2), pages 273-297, April.
    9. Harris, Timothy F. & Yelowitz, Aaron, 2018. "Racial climate and homeownership," Journal of Housing Economics, Elsevier, vol. 40(C), pages 41-72.
    10. Patrick Bayer & Fernando Ferreira & Stephen L. Ross, 2018. "What Drives Racial and Ethnic Differences in High-Cost Mortgages? The Role of High-Risk Lenders," Review of Financial Studies, Society for Financial Studies, vol. 31(1), pages 175-205.
    11. David Arnold & Will Dobbie & Crystal S. Yang, 2017. "Racial Bias in Bail Decisions," Working Papers 611, Princeton University, Department of Economics, Industrial Relations Section..
    12. Chakrabarty, Durba & Osei, Michael J. & Winters, John V. & Zhao, Danyang, 2017. "Are Immigrant and Minority Homeownership Rates Gaining Ground in the US?," IZA Discussion Papers 10852, Institute of Labor Economics (IZA).
    13. Li, Phillip & Mayock, Tom, 2019. "Mortgage characteristics and the racial incidence of default," Journal of Housing Economics, Elsevier, vol. 46(C).
    14. Berger, Lawrence M. & Collins, J. Michael & Smeeding, Timothy M., 2015. "Exiting or retaining owner-occupied housing in the United States 1999–2009: How do social programs matter?," Children and Youth Services Review, Elsevier, vol. 57(C), pages 112-126.
    15. Chan, Sewin & Haughwout, Andrew & Tracy, Joseph, 2015. "How Mortgage Finance Affects the Urban Landscape," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.),Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 987-1045, Elsevier.
    16. Egle Jakucionyte & Swapnil Singh, 2019. "Mortgage Foreclosure Risk After the Great Recession," Bank of Lithuania Working Paper Series 69, Bank of Lithuania.
    17. Wainer, Allison & Zabel, Jeffrey, 2020. "Homeownership and wealth accumulation for low-income households," Journal of Housing Economics, Elsevier, vol. 47(C).
    18. Carlos Garriga & Lowell R. Ricketts & Don E. Schlagenhauf, 2017. "The Homeownership Experience of Minorities During the Great Recession," Review, Federal Reserve Bank of St. Louis, vol. 99(1), pages 139-167.
    19. Anthony DeFusco & John Mondragon, 2018. "No Job, No Money, No Refi: Frictions to Refinancing in a Recession," 2018 Meeting Papers 1293, Society for Economic Dynamics.
    20. Mayock, Tom & Malacrida, Rachel Spritzer, 2018. "Socioeconomic and racial disparities in the financial returns to homeownership," Regional Science and Urban Economics, Elsevier, vol. 70(C), pages 80-96.
    21. Chunhui Ren, 2020. "A Framework for Explaining Black-White Inequality in Homeownership Sustainability," Demography, Springer;Population Association of America (PAA), vol. 57(4), pages 1297-1321, August.

    More about this item

    JEL classification:

    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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