Estimating Racial Price Differentials in the Housing Market
Patrick J. Bayer
Duke University - Department of Economics; National Bureau of Economic Research (NBER)
Marcus D. Casey
University of Illinois at Urbana-Champaign - Department of Economics
Fernando V. Ferreira
University of Pennsylvania - The Wharton School
University of Toronto - Department of Economics
NBER Working Paper No. w18069
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.
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Number of Pages in PDF File: 30working papers series
Date posted: May 12, 2012
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