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Racial Differences in the Total Rate of Return on Owner-Occupied Housing

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  • Rebecca Diamond
  • William F. Diamond

Abstract

We quantify racial differences in the total rate of return on housing in a nationally representative sample of homeowners from 1974-2021. We develop a new method to estimate the rental value of each owner-occupied house, using a house's resale value to proxy for unobservable quality. Black and Hispanic homeowners earn higher but more volatile rates of return than White homeowners, due in part to higher rental yields. These differences are largely explained by household income and education differences. Including returns on properties that do not transact in sample is crucial to accurately measure racial differences in total rates of return.

Suggested Citation

  • Rebecca Diamond & William F. Diamond, 2024. "Racial Differences in the Total Rate of Return on Owner-Occupied Housing," NBER Working Papers 32916, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32916
    Note: LS PE
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    More about this item

    JEL classification:

    • G50 - Financial Economics - - Household Finance - - - General
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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