During the last decade, metropolitan areas in the United States saw unprecedented swings in house prices.  Housing values rose dramatically during the subprime lending boom and subsequently plummeted during The Great Recession as foreclosures and unemployment swept much of the nation. While previous research has established racial disparities in subprime lending and foreclosure prevalence, little work has explored the extent to which homeowners of different racial and ethnic backgrounds experienced different house price changes during the boom and bust. Yet the realities of segregation, migration, and market segmentation likely exposed households of different races to different aspects of last decade’s housing tumult. This paper explores inter- and intra-racial differences in housing value trajectories over the market boom (2005-2007) and bust (2007-2009).

We construct a panel of households from the American Housing Survey (AHS) focusing on homeowners of single-family units who purchased their home before the study time period. We examine racial difference in house price trends both within and across metropolitan areas and study the attributes of metropolitan areas that are associated with large racial gaps in home price appreciation. Findings indicate that black and especially Latino homeowners bore the brunt of the housing market tumult, which can be partially explained by exposure to more volatile housing markets--defined both by geography and housing value. 

Homeownership has been an important vehicle through which American families have been able to build asset wealth. Perhaps The Great Recession’s most durable legacy will be the wealth lost due to the collapse of the housing market, particularly among black and Latino households. This paper contributes to our understanding racial differences in vulnerability to economic downturns and has important implications for policy intended to pull the country out of recession.