Racial Disparities in Housing Returns

Amir Kermani and Francis Wong

American Economic Review, 2026, vol. 116, issue 1, 287-331

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.

JEL-codes: D31 G51 J15 R31 (search for similar items in EconPapers)
Date: 2026
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DOI: 10.1257/aer.20240327

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