The voices of Urban Institute's researchers and staff
June 5, 2012

Place, race, and negative home equity

June 5, 2012

The foreclosure crisis is far from over, with nearly 16 million homeowners underwater on their mortgages, according to Zillow. That’s 31 percent of homeowners with mortgages and 14 percent of households. A recent Zillow infographic shows that, as usual, national summaries are less interesting than breakdowns by geography and by where people stand with regard to home equity—ranging from far below zero to comfortable.

Underwater mortgages are common in the “drive-’til-you-qualify” exurbs of certain metro areas. Just over half the homes in Riverside and San Bernardino counties, for example, have negative equity, far more than in Orange County (25%) or Los Angeles County (32%). In San Bernardino’s high-desert cities of Victorville and Adelanto, for example, over 70 percent of the homes have negative equity. This pattern shows up all over the Sun Belt and in New York, Chicago, and DC. It’s provided another round of ammunition to people who argue that sprawl causes or contributes to many of our social ills.

What doesn’t show up on Zillow’s maps, though, is the uneven racial and ethnic composition of suburban America. This additional layer on the map would show that Victorville and Adelanto aren’t just faraway exurbs of San Bernardino; they’re also majority-minority cities with large numbers of first- and second-generation immigrant families. Atlanta’s highest rates of underwater houses are also distant from downtown, but these hard-hit neighborhoods aren’t just suburban and exurban—they’re also predominantly African American. Meanwhile, Atlanta’s lowest rates of underwater houses are in sprawling zip codes just as far north of its central business district as the hard-hit zips sit to the south. These better-performing zips are predominantly white and non-Hispanic.

The Washington, DC, area’s pattern of negative equity would be hard to understand based entirely on distance from the Capitol. But most people know that the deeply underwater neighborhoods inside the Beltway are modest tracts developed around World War II and now occupied mainly by African Americans and Latinos. Place does matter: predominantly black neighborhoods within the District are less deeply underwater, just as mostly black neighborhoods inside Atlanta are less deeply underwater than its mostly black suburbs. But the DC-area maps, like those of other metro areas, suggest that race still matters at least as much.

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