Neighborhood Racial and Ethnic Change: New Evidence of Discriminatory Patterns in Home Mortgage Lending

• In Event: 1451 - Community and Urban Sociology Section Roundtables (1 hour)
  In Refereed Roundtable 60min: 8. Neighborhood Change

Abstract

Using 2004 and 2010 mortgage applications for the top 100 metropolitan areas nationwide we analyze the relationship between neighborhood racial-ethnic changes and mortgage approval for neighborhoods gaining minority residents. We employ multilevel modeling including dynamic measures of home price-to-income ratios and local credit scores. Controlling for income, demographic, assimilation, employment and housing variables we find no significant relationship between increases in black neighbors and mortgage approval in 2010, an improvement over a small but significant decreased likelihood of mortgage approval in 2004. Our pre-and-post recession analysis finds the relationship between neighborhood racial change and mortgage approval varies by race-ethnicity of the new neighbors. An increase in Asians significantly decreased the likelihood of mortgage approval during both years at a relatively constant rate. Increases in Hispanics were not significant in 2004, but became a negative predictor of mortgage approval post-recession. Non-significant findings suggest the differences in mortgage approval were explained by socioeconomic status, assimilation and other available covariates. Overall, the results offered little support for traditional theories of neighborhood racial-ethnic change and the housing market such as tipping points and invasion succession that posit black racial change to be the most detrimental to mortgage approval, but instead suggest new avenues for research into racial change and homeownership. We are cautiously optimistic that novel results have uncovered a lack of significance between increases in black neighbors and mortgage approval but temper our excitement with the pronouncement that black applicants and static black neighborhood composition still reduce the likelihood that mortgages are approved.

Author

• Meghan M. O'Neil, University of Michigan