Research on intergroup contact has mostly viewed desegregation as a necessary condition for contact to unfold its power to reduce prejudice. Through residential and school choices, however, prejudice also contributes to segregation. To shed light on this bidirectional link, we conducted two survey‐based experiments with stratified quota samples of German adults. In Study 1, respondents with less contact and more prejudice indicated a lower likelihood of renting an apartment in a neighborhood with a larger proportion of minority members, although housing quality and crime rate were held constant. In Study 2, similar results were obtained for the likelihood of enrolling their child at a school with a larger proportion of minority students. Building on these results in a computer simulation, we find that because contact only reduces prejudice, but does not produce pro‐minority preferences, spontaneous desegregation is unlikely to occur even under the most favorable structural and economic conditions.