John R. Salter

Does Home Equity Explain the Black Wealth Gap

Prior literature has shown that blacks have lower rates of homeownership, lower amounts of home equity, and experience lower housing appreciation than whites. This paper examines racial differences in the returns to homeownership using a longitudinal survey of middle-aged homeowners. We find that home equity appreciation is much lower for blacks between 1994 and 2004, however blacks with high incomes do not experience the same home equity gap. While there are regional differences in negative racial effects, high income blacks are able to avoid those as well. We find that among those who acquire the largest increase in home equity, being black is not detrimental. We also find that even when we account for differences in home equity growth, racial differences in wealth growth persist.

Explaining the 2004 Decrease in Minority Stock Ownership

Prior literature has examined minority stock market participation and found that it increased rapidly throughout the 1990’s and into the early 2000’s. However, in 2004 after stock prices had suffered decline, Black and Hispanic market participation fell off sharply. This paper uses the NLSY 79 a panel data set to examine whether the diminished likelihood of Black and Hispanic 2004 market participation is due to race or variation in cognitive ability and investor experience. We find that IQ and investor experience subsume all racial effects in the likelihood of 2004 market participation.