Volume 17, Issue 4

2006 

 

Homeownership is an important social and financial achievement for most
U.S. households. Various explanations have been offered for the large and
persistent gap in the ownership rates of black and white households, but
studies have consistently fallen short of identifying all of the causes.

The data we used were derived from a survey of the residents of the
Columbus, OH, area. We argue that differences in real estate market knowledge
and information affect the tenure choice decisions of black and white
households. We estimate a model that is augmented to include a measure of
real estate knowledge and find that additional knowledge increases the likelihood
of homeownership. This holds even when we account for the endogeneity
of such knowledge. We conclude that differences in real estate
knowledge contribute to explaining the racial gap in homeownership rates, a
finding that can be addressed through public policy interventions such as counseling programs.