K-State Economist’s Research Suggests Low-Income, Vulnerable Homeowners Need Support After Purchase to Avoid Foreclosure or Having to Sell Their Home

Tracy Turner, Yahoo! News, November 20, 2008

Programs that help low-income and minority individuals and families purchase a home may be doing more harm than good, according to a Kansas State University economist.

{snip} She and Marc Smith, professor of finance and director for the Institute of Housing Studies at DePaul University, are publishing their research in a forthcoming issue of the Journal of Regional Science.

{snip}

{snip} From 1970 to 2005, they found that low-income homeowners were consistently more likely to exit homeownership than higher income households. Hispanic households had higher exit rates before 1997 but not after.

They also found that a gap between blacks and whites exiting homeownership arose after 1997. Turner said this could be because policies in the 1990s that encouraged minority homeownership were not sustainable in the long term.

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Turner said their research is the first to find that the homeownership gap before 1997 is because fewer blacks were becoming homeowners in the first place, not because they were leaving homeownership at higher rates.

Because homeownership offers many benefits, Turner said it is important to understand why black, Hispanic and low-income households are less likely to own their housing. As renters, they are missing out on the benefits homeownership can provide.

An important area of future research, Turner said, would be to look at how much of the foreclosure crisis is attributed to these types of policies versus how much of it is because of liberalized lending standards, predatory lending and house-price declines.

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