The Great Recession was associated with a dramatic reduction in the wealth of millions of Americans, particularly wealth in the form of home equity. The net worth of the typical household plunged by 40 percent, or about $50,000, as a result of the worst economic downturn since the Great Depression.1 Of course, these detrimental effects were not felt equally by all groups. Relative to white wealth, black wealth was hit especially hard by the Great Recession. Blacks saw their median net worth fall precipitously compared with whites (that is, in percentage terms, not in absolute terms).2 Between 2005 and 2009, the median net worth of black households dropped by 53 percent, while white household net worth dropped by 17 percent.3

Yet whether we look at the racial wealth gap before or after the Great Recession, the disparity between blacks and whites is persistent. According to the U.S. Census Bureau’s Survey of Income and Program Participation, in 2005 blacks had relative holdings of nine cents on the dollar compared with whites—this fell to just five cents in 2009 and inched up to six cents in 2011. In this sense, the Great Recession did not wipe out black wealth but decimated the very modest bit of wealth accumulated by blacks. While the economy continues to recover, and while some point to recent increases in the homeownership rate, we are alarmed by evidence that black college graduates may be falling even further behind in this new paradigm.4

First, we find that long-standing racial disparities in homeownership have worsened in the post-recession recovery. Second, we find that the Great Recession left black college graduates facing enhanced barriers in the housing market. While a bachelor’s degree is often framed as a reliable stepping stone on the path to economic security, our findings add to a growing literature that challenges that accepted wisdom. Research by Hamilton et al. finds that black households headed by a college graduate have less wealth than white households headed by someone who dropped out of high school.5

In particular, we use the Blinder-Oaxaca decomposition technique to demonstrate that the demographic and socioeconomic characteristics of college-educated blacks are explaining less and less of the racial difference in homeownership rates, in turn suggesting that structural barriers (including the criteria by which homes are financed), discrimination in lending and housing markets, and initial wealth itself are playing an increased and racially uneven role in the manner in which college-educated Americans are acquiring new homes.6

Disparities in homeownership rates, 2004 to 2017

Our analysis includes census microdata for the years 2004 to 2017 collected by the American Community Survey (ACS)—we selected these years to account for the periods before and after the Great Recession, as well as the period defined as the Great Recession. While the overall rate difference in homeownership between blacks and whites increased by 2.6 percentage points in the period studied, the difference for blacks and whites with a college degree increased by 3.6 percentage points—from 16.6 percent to 20.2 percent (see Figure A). For both blacks and whites, unsurprisingly, households headed by a college graduate are the education group most likely to be homeowners. While the overall rate difference between blacks and whites with a college degree is smaller than other degree attainment groups, we do find it alarming that since the Great Recession this demographic group appears to be losing ground.7

Blinder-Oaxaca decompositions: Homeownership and college-educated blacks

To better understand the components of the increasing disparities in homeownership in the aftermath of the Great Recession, particularly among those with higher levels of educational attainment, we used Blinder-Oaxaca decompositions of black and white logistic regressions to decipher which portions of the rate difference at each point along the homeownership trend were due to average racial differences in homeownership-related characteristics in comparison to racial differences in the manner in which given levels of characteristics are translated into homeownership (e.g., racial differences in homeownership regression coefficients).

The latter component—the way in which the coefficients are translated into homeownership—are indicative of structural and uncontrolled racial differences in homeownership. For example, structural barriers prior to the recession would be racially motivated subprime targeting, whereas after the recession, structural barriers would include more stringent lending criteria, including larger required down payments.

Based on prior research by Freeman and Hamilton, our analysis considers a set of socioeconomic factors that are likely to be associated with homeownership.8 We consider factors that would affect the feasibility of homeownership, indicate life cycle factors, and signify social status. The socioeconomic and demographic characteristics included in our analysis include age, marital status, educational attainment, wage income in broadly defined brackets, occupational prestige scores, if the household has a child under 18 years of age, the total number of persons in a household, nativity, and gender of the head of household.

The Blinder-Oaxaca decomposition results are illustrated in Figures B and C. Figure B indicates that demographic and socioeconomic characteristics explain a declining portion of the difference in homeownership rates between black and white college graduates in the aftermath of the Great Recession. While in 2004 demographic and socioeconomic characteristics accounted for 56.8 percent of the difference in homeownership between blacks and whites with a college degree, by 2017 these characteristics accounted for only 45.1 percent of the difference.

On the flip side, we see that the racial difference due to coefficients—that is, the portion of the difference in homeownership rates not explained by characteristics—is increasing. Between 2004 and 2017, the share of the black–white homeownership gap attributable to coefficients increased from 43.2 percent to 54.9 percent—an increase of 11 percentage points. No other education group had an increase in excess of 5.2 percentage points over this same period.

Conclusion

The Great Recession led to a paradigm shift in lending requirements. Our findings suggest that this shift has had an especially detrimental effect on black college graduates. Education is not the panacea of upward mobility and economic security, especially as it relates to racial disparity. After all, and as we noted earlier, black households headed by a college graduate have considerably less wealth than white households even when the head of the white household dropped out of high school; that fact coupled with other discriminatory and structural barriers inhibits the ability of blacks to translate their demographic and socioeconomic status into homeownership. The long-standing racial disparities in homeownership, and the wealth it creates and transmits across generations, continue to buttress an inequitable and unfair housing market—even among those with higher levels of education.

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1. Ylan Q. Mui, “Americans Saw Wealth Plummet 40 Percent from 2007 to 2010, Federal Reserve Says,” Washington Post, June 11, 2012.

2. We do not want to convey that the cause of low black wealth is the Great Recession, since it has never been the case that black Americans as a group have been well resourced in terms of wealth. Nonetheless, the meager wealth that blacks had attained at the median was decimated during the housing crisis.

3. Rebecca Tippett, Avis Jones-DeWeever, Maya Rockeymoore, Darrick Hamilton, and William Darity, Beyond Broke: Why Closing the Racial Wealth Gap Is a Priority for National Economic Security, Center for Global Policy Solutions, May 2014.

4. Prashant Gopal, “Homeownership Rate in the U.S. Rises as Buyer Competition Cools,” Bloomberg, October 30, 2018.

5. Darrick Hamilton, William Darity Jr., Anne E. Price, Vishnu Sridharan, and Rebecca Tippett, Umbrellas Don’t Make It Rain, The New School, Duke Center for Social Equity, and Insight Center for Economic and Community Development.

6. A.S. Blinder, “Wage Discrimination: Reduced Form and Structural Estimates,” Journal of Human Resources 8, no. 4: 436–455; R. Oaxaca, “Male–female Wage Differentials in Urban Labor Markets,” International Economic Review 14: 693–709; Mathias Sinning, Markus Hahn, and Thomas Bauer, “The Blinder-Oaxaca Decomposition for Nonlinear Regression Models,” Stata Journal 8, no. 4: 480–492.

7. The black–white homeownership rate disparity for those with a college degree increased by 3.6 percentage points between 2004 and 2017, which is more than the rate disparity increase for those with a high school diploma (2.1 percentage points) and for high school dropouts (1.9 percentage points). However, the black–white homeownership rate disparity for those with some college education increased by slightly more than those with a college degree, by 4.1 percentage points. We highlight that (1) it is notable that blacks with a college degree fared worse than the two groups with the lowest levels of educational attainment, (2) 93.6 percent of the rate disparity increase for blacks with a college degree occurred in 2012 or after, compared with 49.4 percent for those with some college, and (3) that our Blinder-Oaxaca decompositions find those with some college education had the smallest increase in the portion of the black–white homeownership rate disparity attributable to initial wealth, discrimination, or other structural barriers.

8. Lance Freeman and Darrick Hamilton, “The Changing Determinants of Inter-Racial Homeownership Disparities: New York City in the 1990s,” Housing Studies 19, no. 3: 301–323.