Racial Disparities in Home Selling

Abstract

This study investigates the financial disparities Black sellers face in the US housing market. Using repeat-sale transactions from 2003 to 2020, we document that Black sellers earn, on average, 0.36% lower annualized unlevered returns on their property sales compared to non-Black sellers. These racial disparities in housing returns are not explained by seller characteristics, property renovations, the buyer's race, seller agent fixed effects, and appraisal measures. However, we find significant racial gaps in listing prices and time on market, which we attribute to intermediaries involved in housing transactions. Controlling for these factors reduces the racial gap in returns to effectively zero. Additionally, we construct a measure of a neighborhood's exposure to buyer agent discriminatory practices using the HUD Discrimination Survey, and find that the racial gap dissipates for homes less exposed to discriminatory practices. Finally, we find that when homes are sold to iBuyers, where human intermediary bias is removed, the racial gap in housing returns disappears. Our findings suggest that Black sellers experience worse selling outcomes due to higher search frictions caused by human intermediary practices.

Keywords: race, housing, wealth, housing market, search-and-matching, racial disparities, heterogeneity, iBuyers, home listings, appraisals, liquidity constraints, housing renovations, HUD

JEL Classification: G5, H0, R3