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Examining the Racial Divide in Home Sales

house hands homesAccording to a new Redfin analysis, the average home in a primarily Black neighborhood nationwide is worth $46,000 less than a comparable home in a primarily white neighborhood. Redfin analyzed the values of more than seven million listed and sold from 2013 through February 2021, accounting for the fundamental factors that contribute to a home's value, such as size, condition, neighborhood amenities and schools.

"Our analysis rules out all the factors that are typically associated with home value and still finds a significant difference between the values of otherwise nearly identical homes in similar Black and white neighborhoods. We're left with bias and systemic racism to explain the variation in home values," said Redfin Senior Economist Reginald Edwards. "Today's Black homeowners are missing out on $46,000 worth of wealth due to racist housing policies that were outlawed in the 1960s and continuing biases among homebuyers and housing professionals in parts of the homebuying process like appraisals and mortgage lending—and that's $46,000 that would multiply as the years go on and benefit future generations."

The gap in home values between homes in Black and white neighborhoods has held steady over the last eight years, fluctuating just slightly year by year. Homes in primarily Black neighborhoods nationwide were valued at an average of roughly $41,000 less than comparable homes in primarily white neighborhoods in 2020, compared to a $46,000 devaluation in 2013.

The U.S. Census Bureau reports that slightly more than 44% of Black Americans own the home they live in, versus 74.5% of white Americans. The Black families who do own their homes have less equity than other races, with median home equity of $89,000 in January 2021 versus $113,000 for white families.

"No real progress on the racial home-value gap has been made over the last decade, which highlights the depth of the problem and how difficult it is to change," said Redfin Chief Economist Daryl Fairweather. "There isn't a policy that would make people less prejudiced. We would need to see a broad cultural shift in the way homebuyers view neighborhoods that are predominantly Black. I'm hopeful that can happen. It used to be that many white homebuyers would consider a neighborhood undesirable if there were any Black residents at all, but now diverse neighborhoods aren't as stigmatized. However, there still appears to be a stigma against primarily Black neighborhoods. Unfortunately, the longer Black Americans have lower home values than their white counterparts, the longer they are missing out on wealth that could be used for other investments and to pass along to their children."

Redfin examined trends in homes sold over the last five years in the Chicago metro market. Crime rates are one factor in sale prices. Incorporating crime rates into Redfin's city-level analysis for Chicago shows that all else being equal—including crime rates—homes in primarily Black neighborhoods are valued at an average of $56,000 less than comparable homes in primarily white neighborhoods.

"Homes in majority-Black parts of Chicago are valued lower, and the cycle set in motion by policies like redlining make it tough to equalize home values," said Arnell Brady, a Redfin Mortgage Advisor based in Chicago. "There's simply a perception that a home in mostly Black Bronzeville, for example, is worth less than a home in Lincoln Park, which is mostly white. It might be the exact same house, but the demographics and amenities of the neighborhood are different."

Click here for more information on Redfin’s latest study.

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.
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