Race, uneven recovery and persistent negative equity in the southeastern United States

ABSTRACT

I analyze neighborhoods with persistent negative equity in the Southeast to understand whether persistent negative equity can be explained by the same factors that led to the crash or whether dynamics during the recovery period are more relevant. Negative equity is high in the Southeast and concentrated in urban areas. In a series of regressions, I evaluate the contribution of income, commute times, unemployment, housing stock quality, vacancy rates, mortgage market factors, and racial/ethnic composition to rates of negative equity. I also provide within-state and within-metropolitan estimates. I find that even after controlling for subprime lending, the severity of the housing market crash, and other factors, the places with persistent high negative equity are in predominantly Black ZIP codes. Other correlates with persistent negative equity are longer commute times, higher unemployment rates, and high rental vacancy rates. Even after controlling for factors relating to the housing market crash, race remains the strongest predictor of persistent negative equity. This finding indicates that though subprime lending and the foreclosure crisis exacerbated racial and spatial inequality, the recovery itself has also been uneven and has proceeded in a way that widens the racial gap in housing wealth. To further explore the dynamics of the recovery, I provide preliminary evidence that recovery efforts like refinances of Home Affordable Refinancing Program–eligible loans were less likely to be performed in predominantly Black neighborhoods.

Acknowledgments

The author acknowledges Dan Immergluck, a professor in the Urban Studies Institute in the Andrew Young School for Policy Studies at Georgia State University and a visiting scholar at the Federal Reserve Bank of Atlanta; Carolina Reid, Assistant Professor in the Department of City and Regional Planning at the University of California, Berkeley; Karen Leone De Nie, Assistant Vice President of Community and Economic Development at the Atlanta Fed; Jessica Dill, Economic Policy Analyst in the Atlanta Fed’s Center for Real Estate Analytics; Carl Hudson, Director of the Atlanta Fed’s Center for Real Estate Analytics; Chris Cunningham, Atlanta Fed Research Economist and Assistant Policy Adviser; and three anonymous reviewers for thoughtful comments and review of this work during drafts. This article was presented at the 46th Urban Affairs Association Conference in San Diego, California, March 16–19, 2016.

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Elora Lee Raymond

Elora Lee Raymond is an assistant professor in the Department of City Planning and Real Estate Development at Clemson University. Her research is in housing, real estate finance, and sociospatial inequality. She holds an AB in History from Brown University and a PhD in Urban Planning from the School of City Planning and Real Estate Development at Georgia Institute of Technology.