Sociation Today

From Boom to Bust: The Effects of Economic Recession on Minority Groups' Experience in the Housing Market

    Housing is one of the most important investments and assets for many American families. By 2006, attributed to factors like favorable mortgage lending practice, economic boom, incentive policies, and low interest rates (Eggers 2001; Gabriel and Rosenthal 2002; Gramlich 2007), homeownership rates in the US reached historically high of 69.2 percent (U.S. Bureau of the Census 2009). Minority groups benefited from the housing prosperity with the evidence of increased homeownership rates. For instance, in the year of 2006, Asian immigrants virtually eliminated the gap in homeownership between them and their native-born counterparts (U.S. Bureau of the Census 2009).

    The boom did not last long. Economic recession and the subprime loan crisis since 2007 widened the gap in homeownership between minority groups and whites once again. Homeownership rate for Blacks fell from 48.2% in 2005 to 46.2% in 2009 (U.S. Bureau of the Census 2009). One explanation for the drop in homeownership is that minority groups, especially Blacks, are disproportionately represented among sub-prime loan borrowers. The 2007 Annual Report on Minority Lending found that 48% of loans made to Blacks were subprime, and the rate was 41.6% for Hispanics (Compliance Technologies and Genworth Financial 2007). One explanation for such high rates of subprime loans among the two minority groups is that they have fewer financial resources such as savings than whites do to pay for a house (Kochhar et al. 2009). At the same time, only 17.1% of mortgages made to Asians were subprime, which was even lower than that the rate for whites. Asians experienced a notable but small drop in homeownership rate from 60.8% in 2006 to 59.1% in 2008. As homeownership generates many positive economic benefits for a household, it is therefore important to study what factors determine the fluctuations of homeownership across these minority groups, in addition to the macro-level explanation of currently depressed housing market.

   Homeownership, however, is just one component of the whole picture of one's economic experience. Oliver and Shapiro (1995) suggested that while homeownership symbolizes the potential asset one could accumulate, home equity is a more concrete tool in terms of capturing financial assets that have been obtained by a household. Minority groups, especially Blacks and Hispanics, are more likely to have negative experience in home equity than whites (Oliver and Shapiro 1995; Flippen 2001). Krivo and Kaufman (2004) explored the cause of disparity in home equity between whites, Blacks, Asians, and Hispanics. They suggested that housing value, mortgage and other financial characteristics, as well as locational housing market characteristics are all factors that contribute to the inequality in home equity between different race and ethnic groups. Given these existing studies, one question this paper was to address was how the changed economic environment and housing market after the housing bubble burst affected the pattern of racial disparities in home equity. According to the New York State Association of REALTORS (2009), the median price of a single-family home in New York State decreased from $235,000 in 2007 to $199,000 in 2009, by 15.3%. This decline indicated that those who bought a house during the housing boom period experienced housing value depreciation. The likelihood of real estate depreciation in conjunction with the fact that Blacks and Hispanics were more likely to borrow higher-priced subprime loans led us to test the following hypotheses: 1) Did Blacks, Asians, and Hispanics suffer more real estate asset loss than non-Hispanic whites? 2) Were Asians more advantaged in home equity compared to Blacks and Hispanics?

    We employed the concepts of home homeownership and home equity to understand how the economic crisis affected financial asset accumulation across the three minority groups (Blacks, Asians, and Hispanics) and between them and non-Hispanic whites, within the theoretical framework of racial stratification of wealth founded by Shapiro and Oliver (1995), and the spatial assimilation and segregation theory. The 2005 and 2009 American Housing Survey national data were examined and compared side by side to provide a dynamic view of differences in housing wealth across the three minority groups. To address our questions and test the hypotheses proposed in this study, we adopted homeownership and home equity as the dependent variables. Several groups of independent variable were controlled, including race and ethnicity, demographic information and family composition, socioeconomic background, immigration status, geographic location and financing characteristics.

Previous Studies

    Housing wealth, according to Oliver and Shapiro (1995), can create the opportunities to secure the "good life" in any form needed - education, business, training, justice, health, leisure time, etc. Stegman, Freeman, and Paik (2006) argued that accumulated home equity is capable of satisfying a family's present and future financial needs. Showing the divergent access to wealth, based on race, sheds light on the specific state policies, institutionalized racism and employment discrimination that impair the ability of Blacks to accumulate wealth. Thus researchers agreed that measuring wealth inequality serves the purpose of revealing socioeconomic disparity between different racial and ethnic groups.

    Several factors were proposed by Oliver and Shapiro (1995) as prominent predictors of wealth accumulation for whites and Blacks: income, education, and occupation. Income inequality had a strong and positive relationship with wealth inequality. Education and occupation were traditionally studied as indicators of one's socioeconomic status. According to this study, people with an advanced degree had more access to wealth compared to those with lower educational attainments. Great diversity in wealth between Blacks and whites persisted even after other indicators were taken into account. This finding suggested that race (mainly in the category of whites vs. Blacks) and its social context play a key role in hampering Blacks' access to wealth accumulation.

    Housing discrimination brings a heavier cost to minority groups to be homeowners, and hence their ability to invest in real estate assets. Homeownership is viewed as "a critical gatekeeper in mapping hierarchically ordered groups into locations" (Alba and Logan 1992: 1318). It costs members of the disadvantaged minority groups more to pursue homeownership, and they are less able to translate their needs and preferences associated with household composition into residential mobility. Compared with their effects on whites, the impact of socioeconomic variables is stronger and the impact of the household composition variables is weaker on minority group members' pursuit of suburban residence and better neighborhoods.

    In addition to those macro-level factors discussed above, researches on housing inequality, including homeownership, residential mobility and housing equity have worked with the microeconomic explanations, in particular the life-cycle thesis of consumer behavior. Households choose to purchase according to their needs, preferences and available financial resources. People accumulate their assets over a life course based upon their earlier and current economic sources until retirement. Age, marital status, the number of children and income, accordingly, are identified as the explanatory factors for housing inequality (Alba and Logan 1992a; Flippen 2004; Krivo and Kaufman 2004; Oliver and Shapiro 1995; Parcel 1982; Shapiro 2004). Flippen (2001) provided a modification of this model by arguing that all differences in household characteristics across groups would contribute to the disparity in homeownership and home equity.

    Homeownership and home equity are treated as major sources of wealth accumulation for a large proportion of households in this country. Home equity, calculated as housing price minus all owed principle, especially represents the net housing wealth a family owns. Studying wealth accumulation, as Oliver and Shapiro (1995) proposed, better serves the purpose of revealing the effect of racially stratified social structure on the persistence and perpetuation of racial and ethnic inequality in this country. Krivo and Kaufman (2004: 586) also suggested that "studying inequality in total wealth ignores any unique processes that generate racial-ethnic differences in particular types of wealth." Studying factors that affect diversity in home equity, therefore, enables a deeper view of racial and ethnic inequality in wealth. Many studies have shown that Blacks and Hispanics experience a high level of residential segregation in their neighborhoods (Charles 2001; Emerson, Chai and Yancey 2001; McConville and Ong 2001; Wilson and Hammer 2001; Flippen 2004). The high concentration of these two groups in central city neighborhoods with poor amenities then further reduces financial return from their home investments (Flippen 2004). The practice of financial institutions and real estate agents tends to be less favorable towards Blacks and Hispanics furthermore, which increases the difficulty for these minority groups to locate houses with high appreciation values.

    Researchers like Farley (1996), Massy and Denton (1993), Squires and Hyra (2010), and Yinger (1997) found that Blacks and Hispanics are more disadvantaged in the process of applying for mortgages and refinancing their houses compared to whites. Krivo and Kaufman (2004) explored the cause of disparity in home equity between whites, Blacks, Asians, and Hispanics. They argued that housing value, mortgage and other financial characteristics, and locational housing market characteristics are all factors that contribute to the inequality in home equity between different race and ethnic groups.

Research Methods

Data

    The national samples of 2005 and 2009 American Housing Survey (AHS) were used to analyze the racial-ethnic gaps in homeownership and home equity between whites, Blacks, Hispanics and Asians. AHS is a longitudinal survey of housing units, and this national survey has been conducted every other year since 1985. The sampled housing occupants provide their basic demographic information, such as age, race and ethnicity and income, and the information on housing characteristics and costs, such as mortgage and down payments.

    From 2001 to 2006, the American real estate market experienced a housing boom. Homeownership and housing values increased greatly. The American real estate market has been in a recession since 2007. The comparison of 2005 and 2009 revealed how the racial-ethnic disparities in housing wealth changed after the housing market bubble burst. The unit of analysis was households because housing is a household-level concept. This study analyzed only the households living in permanent housing units. The residents of mobile homes and those with missing information of equity were excluded from the analysis. Mobile homes usually do not appreciate and therefore cannot help the owners to accumulate net worth.

Variables

    Table 1 presents the operationalization of the variables. Homeownership was measured as a dummy variable. Home equity was measured as the self-estimated market value of an owned home minus the total amount of mortgages owned on the property (in $10,000). The regression coefficients could then directly show the changes in the amount of home equity (in $10,000) with the changes in the predictor variables.

Table 1: Operationalization of Variables

Variable	Operationalization
Dependent Variables
Homeownership	Dummy variable coded 1 if the householder owns the unit
Housing Values	The owner self-estimated the market value ($10,000)
Home Equity	The owner self-estimated market value and total amount of mortgages owned on the property.
Predictor Variables
Race
White	Dummy variable coded 1 if the household or spouse is white.
Black	Dummy variable coded 1 if the unmarried households is Black or the householder or spouse is Black and none is white.
Asian	Dummy variable coded 1 if the unmarried householder is Asian or both the householder and spouse are Asian.
Hispanic	Dummy variable coded 1 if the unmarried householder is Hispanic or the householder or spouse is Hispanic and none is white or Black.
Household Composition Characteristics
Age	The maximum of the householder's or spouse's age.
Male Householder	Dummy variable coded 1 if the householder is male.
Married	Dummy variable coded 1 if the householder is married.
Number of Children	The number of children in the household under 18.
Socioeconomic Status
Household Income	Household yearly income ($10,000)
Education	The maximum of the householder's or spouse's educational achievement in dummy variables for less than high schoo, high schoo, some college, college and postgraduate.
Assimilation
Native-Born Citizens	Dummy variable coded 1 if the householder or spouse is native born U.S. citizen.
Naturalized Citizens	Dummy variable coded 1 if the householder or spouse is naturalized US. citizen but none is native born citizen.
Non-Citizen	Dummy variable coded 1 if neither of the householder nor spouse is a U.S.citizen.
Geographic Characteristics
Northeast	Dummy variable coded 1 if resides in the Northeast.
Midwest	Dummy variable coded 1 if resides in the Midwest.
South	Dummy variable coded 1 if resides in the South.
West	Dummy variable coded 1 if resides in the West.
Central City	Dummy variable coded 1 if resides in a central city.
Suburb	Dummy variable coded 1 if resides outside a central city in a metropolitan area.
Exurb	Dummy variable coded 1 if resides outside suburb in a metropolitan area.
Financial Characteristics
Prior Owner	Dummy variable coded 1 if householder owned house before the current one.
Down Payment	Dummy variable coded 1 if householder paid a down payment.
Interest Rate	Primary mortgage interest rate.
ARM Mortgage	Dummy variable coded 1 if primary mortgage has variable interest rate.
FHA/VA/ FHAM	Dummy variable coded 1 if primary mortgage FHA/VA/FAHM mortgage
Other Factors
Condominium Owner	Dummy variable coded 1 if the housing unit is a condominium.
Length of Residence	The number of years the householder has lived in the current dwelling.

Source: American Housing Survey 2005 and 2009.

     Race was measured with dummy variables: whites, Blacks, Hispanics and Asians and whites were the reference group using the respondents' self-identification. Only the householders and the spouses, if there was one, who claimed to be in a single racial group were taken into account. Those who identified themselves as a member of multi-racial groups were excluded. For married couples, intermarriage was taken into account, as an indicator of assimilation.

     Household composition characteristics were controlled, including age, householder's gender, marital status and the number of children in the household under 18 years old. Marital status was a dummy variable to differentiate the currently married couples from those who are not married, no matter whether the spouse was present or absent. Age was the maximum of the householder's or the spouse's values. Socioeconomic status was measured by educational attainment and household yearly income (in $10,000). Educational degree was the maximum of the householder's or the spouse's values. It was measured with a set of dummy variables comparing less than high school certificate, high school degree, some college education, college degree and post college education. Immigration status was used as indicator of assimilation and includes dummy variables for native born U.S. citizens, naturalized citizens and non-U.S. citizens. A married couple was categorized into the non-U.S. citizen group only if neither was an U.S. citizen. As discussed by Krivo and Kaufman (2004), the presence of a U.S. citizen spouse typically overcomes the difficulty of language and information barriers.

    Five financial factors associated with the greater accumulation of equity were taken into account: prior homeownership, making a down-payment, the mortgage interest rate and controls for variable rate mortgages and FHA/VA/FHAM financing. The dummy indicator of prior ownership measured whether a household owned another housing unit before their current one. Prior ownership indicates the possible equity accumulation from the prior housing unit. The down payment measured whether or not a household paid a down payment at the time of purchase. Without down payment slows down home equity accumulation and usually results in a higher interest rate than a traditional mortgage. This study included dummy variables for variable interest rate mortgages (ARM) and FHA, VA or FHAM financing, all of which would reduce equity. Making no down payment and variable interest rate mortgages (ARM), in addition, increase the risk of foreclosure.

    Two indicators were used to control the geographic variation in housing prices and home equity: metropolitan status and region. Four census regions were used in this research: Northeast, Midwest, South and West. Housing appreciation varies by regions. The real estate markets in the Northeast and West experienced this unprecedented prosperity from 2001 to 2005. Location was measured with dummy variables for central city, suburb and exurb. Houses in suburban areas are more likely to appreciate than those in the central city and exurbs. Two other variables were controlled also to address housing appreciation: condominium ownership and length of residence. Length of residence measured in years controls the effect of time on home equity accumulation.

Regression Models

Racial disparities in homeownership were addressed by a logistic regression model. We combined whites, Blacks, Hispanics and Asians to evaluate the contributions of various factors to group differences in the odds of homeownership. Home equity was examined with OLS regression models for home owners only. All of these regression models included predictor variables to control race/ethnicity as well as household composition, assimilation, socioeconomic status, and geographic location. Financial and mortgage characteristics are controlled in the OLS regression models of home equity. All regression models using the data from AHS are estimated for 2005 and 2009 separately. The comparison of these two years inferred the impact of the recent recession in the real estate market on changes in racial inequality in homeownership and home equity. Across time comparisons discussed in this part should be treated as descriptive because their statistical significance was not accessed.

Findings

Descriptive Statistics

Table 2 presented the distribution of homeownership, housing values and equity by race from the AHS data in 2005 and 2009. The AHS surveyed 39,244 permanent housing units in 2005 and 41,386 permanent housing units in 2009. Among these permanent units, 68% were occupied by owners in 2005. In 2009 the comparable figure was 67%. There were 29,516 white (75%), 4,439 Black (11%), 1,239 Asian (3%) and 4,050 Hispanic (10%) households in 2005. There were 30,379 white (73%), 5,066 Black (12%), 1,459 Asian (4%) and 4,482 Hispanic (11%) households in 2009.

Table 2: Descriptive Statistics by Race in 2005 and 2009

	2005 White	2005 Black	2005 Asian	2005 Hispanic	2009 White	2009 Black	2009 Asian	2009 Hispanic
Total # of households	29516	4439	1239	4050	30379	5066	1459	4482
Homeownership Rate %	74.8	48.3	58.4	46.3	74.4	45.6	58.5	45.8
Number of Owners	22067	2143	724	1875	22593	2312	854	2053
Median Housing Value ($10,000)	17.5	11.8	37.3	18.0	19.5	12.5	33.0	17.0
Median Equity ($10,000)	9.9	6.0	16.9	8.5	9.1	5.7	11.0	5.0

Source: American Housing Survey 2005 and 2009

     Whites had a higher homeownership rate than the three minority groups (74.8% in 2005 and 74.4% in 2009). Hispanics had the lowest homeownership rate in 2005 (46.3%), and their rate in 2009 was 45.8%. The home ownership rate of Blacks (48.3%) was slightly higher than that of Hispanics in 2005 but was even lower than that of Hispanics in 2009 (45.6%). Asians had a rate higher than Blacks and Hispanics but lower than whites (58.4% in 2005 and 58.5% in 2009).   The ownership rate of Blacks in 2009 was 3 percentage points lower than their rate in 2005 whereas the ownership rates of the other three groups did not change significantly.

     The median housing value among Asians was higher than that of the other groups.   Blacks had the lowest median housing value in both years. Asian and Hispanic owners showed lower median housing value in 2009 than they did in 2005, while whites and Blacks owned more expensive houses in 2009 than they did in 2005 on average. The median housing values of Asian and Hispanic owners dropped by 12% and 5% respectively. The rate for Whites increased by 11% and for Blacks by 6%. In all of four racial groups, owners experienced a decline in their home equity from 2005 to 2009. Asians and Hispanics showed a more tremendous decrease (35% and 41% respectively) than whites (8%) and Blacks (5%). These changes suggested that the recent turmoil in the American real estate market hit Blacks hardest in their homeownership and Asians and Hispanics more severely in their housing assets. Whites stand out as influenced minimally.

Homeownership

Table 3 presented the logistic regression analysis of homeownership in 2005 and 2009. All predictor variables had significant effects on homeownership in both years except being naturalized citizens and living in the West (in 2005 only). All three minority groups were less likely to be homeowners than Whites. Hispanics had higher odds of homeownership than Blacks and Asians. Among minority groups, Blacks had the least likelihood of owning a home. The odds of owning a home for Hispanics was 79% of whites in 2005 and this odds ratio increased to 82% in 2009. The odds ratio of homeownership of Asians to whites keeps stable from 2005 to 2009 (71% in 2005 and 72% in 2009). The odds ratio of homeownership of Blacks to Whites declined from 66% to 61%, which showed a different trend than the other two minority groups.

Table 3: Logistic Regression Models of Homeownership.

	2005 Odds Ratio	2005 Estimate	2005 S.E	2009 Odds Ratio	2009 Estimate	2009 S.E.
Intercept	0.02*	-3.93	0.0757	0.02*	-3.93	0.0752
Race
Black	0.66*	-0.42	0.0401	0.61*	-0.50	0.0377
Asian	0.71*	-0.34	0.0803	0.72*	-0.34	0.0744
Hispanic	0.79*	-0.24	0.0470	0.82*	-0.20	0.0449
Household Composition Characteristics
Married	2.45*	0.89	0.0295	2.50*	0.91	0.0285
Male Householder	1.19*	0.17	0.0271	1.12*	0.12	0.0260
Age	1.05*	0.05	0.0008	1.11*	0.05	0.0008
# of children	1.14*	0.13	0.0136	1.14*	0.10	0.0132
Socioeconomic Status
Income	1.20*	0.18	0.0044	1.16*	0.15	0.0038
High School	1.31*	0.27	0.0419	1.32*	0.28	0.0430
Some College	1.49*	0.40	0.0422	1.57*	0.45	0.0435
College Degree	1.67	0.51	0.0481	1.90*	0.64	0.0489
Postgraduate	1.68*	0.52	0.0565	1.97*	0.68	0.0555
Citizenship
Naturalized Citizen	0.97	-0.03	0608	0.98	-0.03	0.0537
Non-Citizen	0.40*	-0.93	0.0630	0.43*	-0.85	0.0581
Geographic Characteristics
Midwest	1.77*	0.57	0.0392	1.72*	0.54	0.0357
South	1.65*	0.50	0.0361	1.69*	0.52	0.0342
West	1.00	0.01	0.0391	0.91*-	-0.09	0.0374
Suburb	1.96*	0.67	0.0292	1.76*	0.57	0.0279
Exurb	2.03*	0.71	0.0363	1.92*	0.65	0.0375
N	40812			42892
DF	19			19
Likelihood Ratio Chiquare	13285.86*			14210.71*

Source: American Housing Survey 2005 and 2009
*p(probability> Wald Chi square)<.0.05

All household composition characteristics had a significant association with the likelihood of owning a home, and their effects on homeownership did not change significantly between 2005 and 2009. Being married, being older, having more children under the age 18, and having a male householder all increase the likelihood of owning a home. Education and household income associated positively with the likelihood of owning a home. Non-citizens were less likely to own a home than native born citizens. Households in the South and Midwest were more likely to own a home than those in the Northeast. Households in the Northeast and West did not show a significant difference in their likelihood of being homeowners in 2005. In 2009, households in the West showed a significant disadvantage. This change indicated that the West experienced a more severe housing recession than other areas did. Residents in suburbs and exurbs were nearly 100% more likely to own homes than those in central cities. Yet the advantage of suburban residence over central cities narrowed in 2009, compared to 2005. The odds ratio of suburbs to central cities dropped from 1.96 to 1.76.

Some findings in the logistic regression models of homeownership were consistent with the assimilation perspective. The assimilation perspective asserts that group differences can be well explained by the individual level variables. The logistic regression models showed that individual level variables, such as household composition factors, socioeconomic background and citizenship status can effectively influence the odds of homeownership. Some findings lend support to the stratification perspective. The stratification perspective attributes group differences to group membership. Whites' higher chance of being homeowners than minority groups was consistent with the stratification perspective.

There were some notable changes between 2005 and 2009. The disparity between whites and Hispanics in the odds of homeownership narrowed. Blacks showed a further disadvantage compared to whites in 2009 than in 2005. These changes indicated that this recent housing recession hit Blacks hardest, whereas Hispanics succeed in shortening their disadvantage and showed the strongest performance among minority groups. Asians were not affected by this recession regarding their homeownership. The net effects of educational degrees stood out to be more significant. Residents in the West were less likely to attain homeownership than those in the Northeast did during the recession. The advantages of residents in suburbs and exurbs over central cities at homeownership declined.

Home Equity

The analysis of the dichotomous variable of homeownership falls short of giving a complete view of racial inequality in housing market. Homes vary considerably in overall values. An important source of wealth is the equity realized by home owners from their houses. Households substantially differ in their likelihood of realizing equity from their houses. Analysis of racial inequality in home equity will help to understand how racial groups differentially realize wealth accumulation from their investment in real estate. The racial gap in housing equity, hence, should also be analyzed.

Table 4 presented the regression coefficients of the OLS models of home equity. The data showed a racially differentiated pattern of acquiring home equity. Blacks and Hispanics accumulated less equity from their homes than whites and Asians did. Asians accrued more home equity than other racial groups did. In 2005, Blacks' home equity on average is $14,400 less than that of whites, when other variables were controlled. This racial gap was amplified to $17,900 in 2009. The gap between whites and Hispanics was not outstanding in 2005 and became $26,200 in 2009. The advantages of Asians over whites on acquisition of home equity in 2005 and 2009 were $22,000 and $26,000. The racial disparities in home equity between whites and two minority groups, Blacks and Hispanics, were consistent with the stratification perspective.

Table 4: OLS Regression Model of Home Equity ($10,000)

	2005 b	2005 SE	2009 b	2009 SE
Intercept	-2.07	1.4555	-3.73*	1.3582
Race
Black	-1.44*	0.6304	-1.79*	0.5599
Asian	2.20*	1.0534	2.60*	0.8880
Hispanic	-0.67	0.6903	-2.62*	0.6111
Household Composition Characteristics
Married	-0.29	0.3879	0.29	0.3462
Male Householdeer	-0.91*	0.3416	-0.06	0.2999
Age	0.19*	0.0168	0.20*	0.0151
# of Children	0.92*	0.1567	0.75*	0.1443
Socioeconomic Status
Income	0.69*	0.0229	0.53*	0.0202
High School	-0.78	0.7649	0.80	0.7705
Some College	-0.47	0.7427	0.50	0.7512
College Degree	2.56*	0.7691	2.28*	0.7728
Postgraduate	3.81*	0.8050	3.14*	0.7953
Citizenship
Naturalized Citizen	3.03*	0.8019	1.24	0.6721
Non-Citizen	-0.16	1.0025	-0.66	0.8397
Geographic Characteristics
Midwest	-6.12*	0.4874	-7.32*	0.4113
South	-4.16*	0.4706	-5.11*	0.4115
West	8.60*	0.5086	-0.54	0.4528
Suburb	1.34*	0.3946	-0.43	0.3527
Exurb	-2.95*	0.4902	-1.05*	0.4698
Financial Characteristics
Prior Owner	2.82*	0.3678	1.62*	0.3304
Down Payment	3.65*	0.5950	2.41*	0.4713
Interest Rate	-1.03*	0.1137	-0.81*	0.1043
ARM Mortgage	-0.40	0.4770	-0.75	0.4500
FHA/VA/FHAM	-2.79*	0.4480	-1.23*	0.3505
Others
Length of Residence	0.21*	0.0211	0.22*	0.0187
Condominium Owner	-0.68	0.7047	-0.29	0.5644
N	16607		17156
Rsquare	.022		0.15

Source: American Housing Survey 2005 and 2009
p(probability >|t|)<.0.05

     Being older and having more young children at home were positively associated with the amount of home equity. Income and college education are positively correlated to home equity. The positive effects of family needs (e.g., the number of young children at home) and socioeconomic status on home equity lend support to the assimilation model's micro-economics perspective.   Compared to natives, naturalized citizens accrued more home equity in 2005 while the difference diminished in 2009. With comparison to those living in the Northeast, people in the Midwest and in the South had less home equity whereas people in the West showed an advantage in home equity (only in 2005). The differences in home equity by regions reflected the regional differences in housing values. Living in suburbs was positively related to home equity (only in 2005) while living in exurbs wass negatively to home equity (central cities were the reference group). Previously owning another home, paying a down payment and years of residence all facilitated accumulating home equity. Higher interest rates, using a government backed mortgage (FHA/VA/FHAM) were negatively associated with home equity.

    The assimilation perspective was supported by some of the findings reported above. In accordance with this perspective, group differences in home equity could be attributed to differences in compositional variables, such as life course and household composition characteristics and socioeconomic status. Some household composition and socioeconomic factors were found to be significantly associated with home equity. People who were older, had more young children at home, earned a higher income and had at least a college degree (in comparison to those with no high school diploma) were predicted to accrue more home equity in both years. The stratification perspective also received some support. Hispanics accumulated less home equity than whites did in 2009 and Blacks were worse off than whites in both years, after controlling for all other variables.

     The recession in the real estate market did influence the racial disparities in home equity. For instance, the gap between whites and Blacks in home equity widened by $3,500. Asians enlarged their advantage over whites on realizing equity from their homes. The net gap between Asians and whites was amplified by $4,000. Changes in racial differences in home equity from 2005 to 2009 indicated that Blacks and Hispanics, compared to whites, were influenced more severely by the turmoil in real estate market but Asians were more likely in the recession to keep their home equity.

    Other notable changes included the net effects of the geographic and financial characteristics. Homeowners in the Midwest and South accumulated less home equity than do those in the Northeast. The difference between the Midwest and the Northeast increased by $12,000. The gap between the South and the Northeast widened by $9,000 within these five years. Yet advantage of the West over the Northeast in 2005 became insignificant in 2009. The changes in the regional differences in home equity showed that the housing market in the Northeast was better able to resist the housing depreciation than are other regions even in the recession. Compared to living in central cities, living in suburbs had no more advantage in 2009 while the disadvantage of living in exurbs declined by $19,000 from 2005 to 2009. The net effects of the financial variables were smaller in 2009 than are they in 2005. This decrease in the net effects might be pulled down by the decline in housing values and home equity.

Conclusions

     Comparison of the results from 2005 and 2009 helped us gain a better understanding of how the changing economic condition and housing market in combination with social structural and individual level factors affected one's chance of success in accumulating housing wealth. The findings suggested that number of children under age 18, householder's demographic characteristics such as age and marital status, higher educational attainments and length of stay in the US, all had positive impacts on one's chance of homeownership. Residents in the West experienced a sharp reversal in homeownership compared to those in other regions. Central city once again showed a negative effect on homeownership. Blacks appeared to suffer the greatest loss in homeownership in this recession as compared to the other two minority groups, after holding these factors under control. This finding echoed previous studies that the social context of being Black had a negative impact on housing asset accumulation. Another valuable explanation was that a high percentage of loans made to Blacks were subprime loans, which posed greater danger to their homeownership. At the same time, it was interesting to see how both Asians and Hispanics demonstrated a rather stable pattern in homeownership. One explanation would be the high percentage of immigrants within these two groups. Researchers like Painter et al. (2001), Krivo and Kaufman (2004), and Kochhar et al. (2009) noticed one changing attribute among these two immigrant groups, a longer period of residence in American society. Long time of residence helps immigrants become acquainted with language, local laws, and financial practices. Furthermore, it increases one's chance of becoming a citizen, which then contributes to one's higher likelihood of owning a home (Passel 2007).

    How was home equity affected in this economic recession? Our findings supported the arguments that locational housing market price had an effect on home equity. For instance, we noticed that the advantage in home equity in the West disappeared in 2009 once the housing market bubble burst. All household characteristics indicated an impact on home equity accumulation as suggested by Flippen (2004). Being a previous homeowner and making a down payment both helped home equity accumulation. Blacks and Hispanics were more disadvantaged in home equity compared to whites. Secondly, though the median net home equity Asians accumulated declined from 2005 to 2009, they stood out in this ominous housing market as having higher home equity accumulation compared to whites. One explanation for the disadvantage experienced by Blacks and Hispanics would be the fact that these two groups were more likely to hold sub-prime loans and higher-interests loans than whites and Asians (Squires, et al. 2009). In addition, locational housing costs and the amount of financial resources one household possessed served as important predictors of how much home equity one built. According to Bucks et al. (2009), neither Blacks nor Hispanics accumulated a comparable amount of financial resources as whites. It is interesting to see how Asians maintain their high position in home equity accumulation despite the fact that most of them were concentrated in areas with highly priced homes. One possible explanation could be the fact that Asians tended to have higher educational attainment and household incomes than the other two groups. The fact that Asians were highly concentrated in metropolitan areas where housing prices were high also contributed to their high home equity. Furthermore, Asians were much less likely to hold subprime loans and higher-interests loans than Hispanics and Blacks.

    This study identified several factors that directly contributed to fluctuation in homeownership and disparity in home equity. Race and its social contexts had various impacts on homeownership and home equity. Economic recession hit Blacks and Hispanics harder than whites. Asians experienced minimal decline in homeownership rates, and actually maintained their advantages in accumulating home equity. For future study, it will be interesting to take a closer look at specific metropolitan areas to see how specific locational housing costs would affect household's housing wealth.

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