Risk Segmentation of American Homes: Evidence from Denver

This article empirically examines the segmentation of house price risk across 99 ZIP-code-delineated neighborhoods in metropolitan Denver. The house price risk in each neighborhood is measured with the temporal variation of quarterly appreciation rates of the neighborhood house price index over the 2002-2007 period. Cross-sectional regressions of neighborhood house price risk on the median household income and the percentage of population in poverty from the 2000 census data for the same neighborhoods provide strong evidence that the house price risk is significantly higher in low-income/poor neighborhoods. Subperiod analyses further indicate that the risk segmentation exists in both a booming period (pre 2005:2) and a busting period (post 2005:3). The results indicate that homeownership can be a much riskier investment for low-income/poor households.