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Abstract: In recent years, there has been continued interest in prospects for the development and sustainability of both mixed‐income and racially diverse communities. We examine an important contributor to racial and economic diversity and segregation—the geographic patterns of homebuyers. In particular, we examine the extent to which neighborhoods within the Chicago metropolitan area have obtained significant levels of income and racial diversity in home buying and maintained such diversity over the 1990s. We analyze the racial and income composition of homebuyers by census tract for two periods: 1993 to 1994 and 1999 to 2000. First, by comparing changes in home buying to 1990 to 2000 changes in cross‐sectional census data, we find that changes in home‐buying patterns are significant contributors to neighborhood racial change. We then find a significant decline in the proportion of whites buying into neighborhoods where nearly all buyers are white. The policy implications of our findings are described and discussed.