What Drives the Racial Housing Wealth Gap for Older Homeowners?

Abstract

Housing wealth is an important resource for economic security in retirement.  Yet, Black households approaching retirement have only a fraction of the housing wealth held by White households.  One reason is that Black households are less likely to own homes in the first place.  A second reason, which is the focus of this paper, is that when they do own homes, they see lower wealth accumulation than White homeowners.  This study uses the Panel Study of Income Dynamics to determine what share of the age-55 housing wealth gap is due to disadvantage at the time of first purchase and what share is due to slower appreciation of subsequent housing wealth.

The paper found that:

• Older Black homeowners faced obstacles at every step – from accumulating a down payment to buying in attractive areas to accessing credit to upsize.
• Both factors – smaller down payments and slower growth in home values – were equally important contributors to the age-55 gap.

The policy implications are:

• Racial disparities in housing wealth are stark among homeowners nearing retirement.
• Future research should consider how structural changes in the housing market over the past 30 years might have alleviated some barriers for younger homebuyers.