Does Your Home Make You Wealthy?

Alexandra Killewald, Harvard University
Fangsheng Zhu, Harvard University

Wealth inequality in the United States is vast, and homeownership is hypothesized to be one key mechanism by which wealth accumulates unequally. Evaluating the effect of homeownership on later-life wealth is challenging, however, because prior wealth affects transitions to homeownership, and homeownership in turn has the potential to affect other wealth-relevant traits, such as marital status. Thus, conventional regression models that predict current wealth as a function of prior homeownership are likely to overestimate the causal effect of homeownership. We propose to provide a more rigorous estimate of the effect of homeownership on later-life wealth by using NLSY79 data and inverse probability of treatment weights to model dynamic selection processes into and out of homeownership across the life course. Our results then provide insight about the potential for disparities in homeownership rates by race and social origins to contribute to persistent racial wealth inequality and the intergenerational transmission of advantage.