Tuesday 15 May 2012

Price discrimination in the housing market

Patrick Bayer, Marcus D. Casey, Fernando Ferreira and Robert McMillan have a new NBER working paper out on the above topic

The abstract reads:
This paper sets out a new research design to test for price discrimination by sellers in the housing market. The design controls carefully for unobserved differences in the quality of neighbourhoods and homes purchased by buyers of each race, using novel panel data from over two million repeat-sales housing transactions in four metropolitan areas. The results indicate that black and Hispanic homebuyers pay premiums of around 3 percent on average across the four cities - differences that are not explained by variation in buyer income, wealth or access to credit. The estimated premiums do not vary significantly with the racial composition of the neighborhood or, most strikingly, the race of the seller. This latter result rules out racial prejudice or animosity on the part of sellers as the primary explanation for the estimated premiums.
So black and Hispanic homebuyers pay premiums of around 3 percent but this isn't due to variation in buyer income, wealth, access to credit or racial prejudice on the part of sellers. We are running out of obvious reasons.

3 comments:

Tim Worstall said...

"So black and Hispanic homebuyers pay premiums of around 3 percent but this isn't due to variation in buyer income, wealth, access to credit or racial prejudice on the part of sellers. We are running out of obvious reasons."

Eh?

I'd run with either asymmetry of information (ie, what is the correct price in one area?) or possibly even good old fashioned demand. Having seen the US black ghetto I can imagine those capable of getting out being willing to pay a premium to do so.

Paul Walker said...

Tim. I assume what they are saying is that for a given demand, a never area, blacks and Hispanics still pay more.

Eric Crampton said...

My first thought would have been bargaining intensity, but that should be captured in salaries. Hunh.