A recent study by Duke University found that black and latino buyers paid more for homes than whites did.
The study analyzed over two million housing transactions in four major U.S. markets over the past 20 years. The study found that black and latino home buyers paid on average 3.5% more for similar houses than white buyers did. The scientists who conducted the study controlled for income, household wealth and access to credit. None of those factors seemed to explain the 3.5% premium minorities paid for their homes.
Surprisingly, the study didn’t detect obvious racial prejudice in the sellers. Black and latino home sellers were just as likely to charge higher prices for minority buyers than for white buyers.
The study analyzed home prices in San Francisco, Los Angeles, Chicago and the Baltimore/Washington D.C. area.
The full study is online at the National Bureau of Economic Research website.
Why Do Blacks and Latinos Pay More?
The researchers didn’t find data explaining why minority buyers paid more for similar homes. They speculated that black and latino demographics might have a higher percentage of first time home buyers, and first time buyers might not have as much experience at negotiating for a lower price.
However, they say other studies show that minority buyers don’t get shown as wide of a selection of homes by real estate agents, which may give them a narrower understanding of the market.
The Fair Housing Act of 1968 prohibits discrimination in home sales based on race, religion, gender and other factors. More than 45 years later, the act still doesn’t seem to have put a stop to price discrimination.
The $16,000 Skin Color
Based on the results of the study, a home selling for $450,000 in San Francisco to whites would cost almost $16,000 more if blacks or latinos bought it.
The researchers point out that paying thousands more for homes makes it harder for minorities to build wealth and home equity.
In some areas, the disparity was more severe. In Chicago, for example, where blacks form a higher percentage of the overall population, costs for blacks buying homes were 5.4% more than for whites.
Precise Price Comparisons
The study is different from other, similar studies because the researchers carefully figured in the price the same house had sold for in a previous transaction. It also factored in the rate at which home prices had risen in the neighborhood. The researchers said they wanted to compare apples to apples whenever possible. Their approach was to compare houses in the same neighborhood that sold for the same amount of money in previous years. That way, they could see with precision whether minorities paid more than whites.