This paper examines racial and ethnic differences in high-cost mortgage lending in seven diverse metropolitan areas from 2004 to 2007. Controlling for credit score and other risk factors, African American and Hispanic borrowers are 103% and 78% more likely to receive high-cost mortgages for home purchases. A large part of the increase is attributable to sorting across lenders (55%-65%), and this, in turn, can be largely accounted for by the lender’s ex post foreclosure risk. The remaining within-lender differences are also concentrated in high-risk lenders, revealing the central role of these institutions in explaining market-wide racial and ethnic differences. Received December, 17 2014; editorial decision January 20, 2017 by Editor Philip Strahan.

For most people, buying a house is one of the most significant investment decisions of their lifetimes. Economists have mainly focused on the consumption aspects of this process. For example, a typical model in urban economics might frame the decision of where to live as a discrete choice over a bundle of housing and neighborhood attributes such as location, square footage, schooling options, and crime levels. The investment side of the problem has received considerably less attention, a surprising omission since housing assets comprise approximately two-thirds of the average American household’s financial portfolio, serve an important role in saving for retirement and, as has become increasingly apparent, can be quite risky. This paper views housing markets from an asset-pricing perspective, using finance theory to relate the risk premium of a housing asset (the difference between its expected return and the return for a risk-free investment) to its exposure to risk. As usual in finance, what matters for the risk premium of a housing asset is its exposure to systematic risk, not idiosyncratic risk. In our model, there are two forms of systematic risk to which housing assets are exposed: national risk (which is common to houses everywhere) and local risk (which affects all houses within a given metropolitan area, but nowhere else). Houses are said to be of the same type h if they are located in the same metropolitan area and have the same exposure to systematic risk. Our main conclusions are that (1) houses of every type face a common set of risk prices ( for the national risk and m for the local risk specific to metropolitan area m) that, together with appropriate measures of exposure to risk,

This paper analyzes the influence that juvenile offenders serving time in the same correctional facility have on each other's subsequent criminal behavior. The analysis is based on data on over 8,000 individuals serving time in 169 juvenile correctional facilities during a two-year period in Florida. These data provide a complete record of past crimes, facility assignments, and arrests and adjudications in the year following release for each individual. To control for the nonrandom assignment to facilities, we include facility and facility-by-prior-offense fixed effects, thereby estimating peer effects using only within-facility variation over time. We find strong evidence of peer effects for burglary, petty larceny, felony and misdemeanor drug offenses, aggravated assault, and felony sex offenses. The influence of peers primarily affects individuals who already have some experience in a particular crime category. We also find evidence that the predominant types of peer effects differ in residential versus nonresidential facilities; effects in the latter are consistent with network formation among youth serving time close to home.