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Blacks and Latinos pay more for homes

Study says minority homebuyers are paying 3.5% more than whites.

By Rich_Maloof Apr 25, 2013 5:06PM

Blacks and Latinos pay more for homes than whitesBlack and Hispanic homebuyers pay more than whites and Asians do for comparable dwellings, according to new research. A study released by the National Bureau of Economic Research finds that the minority buyers are paying a premium of about 3.5 percent.

On a $150,000 home, that’s $5,250. On a house selling for $300,000, it’s $10,500. Don’t forget that the selling price of a home also affects the amounts a buyer pays for broker fees, mortgage interest, homeowners insurance, property tax (in some states) and other costs associated with ownership. Considering that many people will transition between two or three homes in a lifetime, the premiums paid can represent a challenge to building equity and wealth.

The study, led by economist Patrick Bayer of Duke University, examined 2 million housing transactions over the past 20 years covering houses of comparable quality purchased by black, Hispanic and white buyers in the same neighborhoods of four major markets: Chicago, Baltimore/Washington, D.C., San Francisco and Los Angeles. The highest price disparities were evident in the Chicago area, where costs for black buyers in historically segregated Cook County, Ill., were 5.4 percent higher than for whites.

“The hopeful news is that we do not detect any obvious pattern of prejudice by sellers,” Bayer said, “raising the prospects for addressing this issue with better real-estate information and practices.”

Backing up his observation that racial bias did not play an apparent role, Bayer found that black and Hispanic sellers sold to minority buyers at the same premium as white sellers. 

The racial composition of the neighborhoods didn’t reveal any clear evidence of racial prejudice, either. Moreover, the study found no explanation in the buyers’ income, wealth or access to credit.

NPR notes that one explanation may be the inexperience of minority buyers, who are more likely to be purchasing a first home. Bayer also pointed out that real-estate agents tend to offer a more limited menu of housing options to minority buyers, leaving them with fewer options and, consequently, more pressure to pay a premium.

But the researchers said they could not determine exactly why minority buyers paid more when buying a comparable home.

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