Race and Home Price in Urban Neighborhoods

Abstract

Price indexes of single family detached houses for 111 neighborhoods in Milwaukee, Wisconsin for the period of 1971-1993 are estimated by using hedonic price method. The rates of price appreciation vary significantly across neighborhoods ranging from 8.75% to - 0.82% per year in nominal terms for the study period. Recent violent crime rates, incomes, and the proportion of African Americans and Hispanics significantly affect the appreciation rate differences. However, even after holding median income and crime rates of neighborhood constant, the differences in appreciation rates are strongly correlated with the proportion of the racial minorities in the neighborhoods. It is estimated that the annual appreciation rate in all white neighborhoods (at the end of the period) is approximately 3% greater than all minority neighborhoods holding other variables constant.

JEL Classification: J15, R0