Price Discrimination in the Housing Market

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2012-05-01

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Abstract

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 neighborhoods 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.

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Scholars@Duke

Bayer

Patrick Bayer

Gilhuly Family Distinguished Professor in Economics

Bayer's research focuses on wide range of subjects including racial inequality and segregation, social interactions, housing markets, education, and criminal justice. His most recent work has been published in the Quarterly Journal of Economics, American Economic Review, Econometrica, and the Review of Financial Studies. He is currently working on projects that examine jury representation and its consequences, the intergenerational consequences of residential and school segregation, neighborhood tipping, gentrification, the effect of police and criminal justice interactions on families, and the impact of bail reform.


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