The Role of Credit Attributes in Explaining the Homeownership Gap Between Whites and Minorities Since the Financial Crisis, 2012–2018

Homeownership rates have been slow to recover since the financial crisis. Minority groups such as Blacks and Hispanics have been particularly slow to transition to homeownership. Using uniquely constructed anonymized household panel data obtained from a credit bureau, we find that Blacks and Hispanics were, respectively, one half and two thirds as likely as Whites to transition to mortgage ownership between 2012 and 2018. We analyze the role of credit attributes, among other factors, in explaining the racial/ethnic gap in transition to mortgage ownership by 2018 for a sample of individuals who were nonmortgage holders in 2012. Using the Blinder–Oaxaca decomposition technique for nonlinear equations, we find that racial/ethnic differences in credit attributes explain a large portion of the White–minority gap in the transition rates. However, there are key differences in experience across the two minority groups. Whereas racial/ethnic differences in geographic location contribute substantially to the White–Hispanic gap in the mortgage transition rate, racial/ethnic differences in household composition and income growth matter more in explaining the White–Black gap in the mortgage transition rate. Lastly, we find there is considerable heterogeneity across states in the contribution of credit attributes and geography to the White–minority gap in the transition rate.