Racial Housing Price Differentials and Neighborhood Segregation

Abstract

We report evidence from the largest study of racial price differentials in the U.S. housing market, constructing a panel of 40 million repeat-sales transactions. We find that price premiums facing Black and Hispanic homebuyers are ubiquitous and systematically higher in neighborhoods with a larger share of non-white residents. We find that non-white buyers purchase at a premium from sellers from a different group. Consistent with predictions from theoretical models (Becker, 1957), we find higher premiums in supply-constrained markets. Leveraging exogenous variation in racial segregation, we find that segregation increases price premiums paid by Black homebuyers.