Working Paper: NBER ID: w18069
Authors: Patrick Bayer; Marcus D. Casey; Fernando Ferreira; Robert McMillan
Abstract: This paper uses unique panel data covering over two million repeat-sales housing transactions from four metropolitan areas to test for the presence of racial price differentials in the housing market. Drawing on the strengths of these data, our research design controls carefully for unobserved differences in the quality of neighborhoods and the homes purchased by buyers of each race. We find that black and Hispanic homebuyers pay premiums of about three percent on average across the four cities, differences that are not explained by variation in buyer income, wealth or access to credit. Further, the estimated premiums do not vary significantly with the racial composition of the neighborhood; nor, strikingly, do they vary with the race of the seller. This latter finding suggests that racial prejudice on the part of sellers is not the primary explanation for the robust premiums we uncover. The results have implications for the evolution of racial differences in wealth and home ownership and the persistence of residential segregation.
Keywords: racial price differentials; housing market; discrimination; home ownership; segregation
JEL Codes: H0; J15; K4; R2; R3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| buyer race (R21) | housing prices (R31) |
| buyer income (D19) | housing prices (R31) |
| down payment (G51) | housing prices (R31) |
| seller race (L85) | housing prices (R31) |
| buyer experience (R21) | housing prices (R31) |
| buyer bargaining power (L14) | housing prices (R31) |