Racial Disparities in Housing Returns
American Economic Review · 2026 · Volume 116 · Issue 1
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.
Keywords
Personal Income, Wealth, and Their Distributions, Household Finance: Household Saving, Borrowing, Debt, and Wealth, Economics of Minorities, Races, Indigenous Peoples, and Immigrants, Non-labor Discrimination, Housing Supply and Markets
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