Homeownership, Race, and the American Dream

In recent years, much of U.S. federal housing policy has focused on two complimentary goals: to increase
U.S. homeownership rates while also narrowing enormous and longstanding racial gaps in
homeownership. Against this backdrop, the U.S. homeownership rate rose to historic highs in the 1990s,
reaching 67.3 percent in 2001, but substantial racial gaps persist. This paper uses data from six years of
the Survey of Consumer Finances to analyze these patterns. Findings indicate that household
socioeconomic characteristics explain nearly all of the gain in homeownership in the 1990s. These
factors also explain all but 8 of the 26 percentage point white-black gap in homeownership in 2001 and all
but 12 of the 28 percentage point white-Hispanic gap. Of the remaining "unexplained" white-minority
gap in homeownership, credit barriers account for no more than 5 percentage points in all of the survey
years from 1983 to 2001. These findings suggest that policy makers will need to look beyond mortgage
market innovation if their goals are to substantially increase homeownership rates while also reducing
racial disparities in homeownership.