Posted on September 29, 2004

Dramatic Gaps in Home Equity Among Whites, Asians, Blacks, and Hispanics Examined

U.S. Newswire, Sep. 23

COLUMBUS, Ohio—U.S. black and Hispanic homeowners have significantly lower levels of home equity than do white and Asian homeowners, even after a wide range of characteristics (including education, income, and housing values) are taken into account, according to a study published in the latest issue of the journal Demography.

Lauren Krivo and Robert Kaufman of Ohio State University found the payoffs from a variety of known home-equity producing strategies—such as longer length of residence, using equity from a prior home sale, lower interest rates, large or inherited down payments, and living in areas with higher than average housing values—are dramatically smaller for both Hispanics and blacks than for whites and Asians.

These findings suggest black and Hispanic households face a weak housing market in which prices and appreciation are low, making equity accumulation slower than in the majority market, according to Krivo.

They based their analysis on the 2001 American Housing Survey, a nationally representative sample of 42,000 households that included data on homeowner’s ethnicity, income, and education, as well as housing costs, values and financing.

For U.S. Asian homeowners, the median net equity is $111,000, compared to $80,000 for whites, $60,000 for Hispanics, and $52,882 for blacks. The researchers report that some part of these gaps is due to group differences in various social and economic characteristics. However, they found that minority households needed higher incomes and levels of education than otherwise similar white households to accumulate as much wealth in their homes.

Blacks and Hispanics gain considerably less equity than do whites for each additional year of ownership. They also found that housing values played a particularly weak role in equity accumulation by blacks and Hispanics.

“Research has shown that blacks and Hispanics have limited access to the most favorable neighborhoods and housing,” noted Krivo. “Whites’ prejudice against living near minorities reduces the demand and hence the value and appreciation of homes owned by blacks and Hispanics.”

Asians accrue equity more rapidly than any other group, they found. U.S. Asians are in a unique situation, the researchers note, with a large share owning homes in the West, where the demand for and appreciation of homes are great.

The researchers emphasize that residential segregation and other forms of discrimination in housing and mortgage markets are particularly important because home equity is the largest component of wealth for most households.

Demography is the peer-reviewed journal published by the Population Association of America.

The full article, “Housing and Wealth Inequality: Racial- Ethnic Differences in Home Equity in the United States”, is available on The Center for Public Information on Population Research is a project of the Population Reference Bureau, funded by the National Institute on Child Health and Human Development.