Anticipated Discrimination in the Home Lending Market

Racial discrimination in the housing market has been a topic of research for at least three decades. The present study extends this line of research by exploring how a newly considered factor, anticipated discrimination in the home lending market, differs by race and affects the probability of owning a home. Using data from a sample of households in Memphis, Tennessee, we show that significant differences in anticipated discrimination by race exist and that, certeris paribus, these expectations help to explain racial differences in home ownership. Combining our results with the findings of two homeownership preference studies, the implication is that anticipated discrimination reduces the demand for homes by creating a situation where blacks are less likely to apply for home loans because they feel that credit will be denied.