Price Discrimination in the Housing Market

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.