Racialized Market Segmentation and Homeownerships Unequal Wealth-Building Effects

• In Event: Global Perspectives on Wealth and Elites

Abstract

Homeownership is widely viewed as a central mechanism of wealth accumulation in the United States, yet its wealth-building effects are deeply unequal across race and ethnicity. Existing explanations emphasize racialized processes that occur during homeownership, such as foreclosure risk and neighborhood-level differences in price appreciation. This paper shifts the analytical focus to the structure of entry into homeownership. I argue that ethnoracial disparities in homeownership’s wealth-building effects arise in part because households enter residential real estate markets through hierarchically organized and racially segmented market positions. I evaluate this argument by examining whether ethnoracial differences in home values at first entry into homeownership explain gaps in homeownership’s wealth-building effects. Using nationally representative longitudinal data from the NLSY79, I estimate race-stratified marginal structural models to recover the causal wealth gains from an additional year of homeownership. I then implement a counterfactual reweighting intervention that equalizes the distribution of purchase prices at entry across racial and ethnic groups. Equalizing entry prices reduces approximately one-fifth of the Black–White gap in wealth accumulation from homeownership over the whole life course but has little effect on the Hispanic–White gap, demonstrating that racialized market segmentation at entry is a key but uneven source of inequality in housing-based wealth building.

Author

• Nils Neumann, University of Michigan-Ann Arbor