Study: Blacks and Hispanics pay 3 percent more for homes

July 13, 2012

Wells Fargo has agreed to pay at least $175 million to settle federal accusations that it had discriminated against Hispanic and black homebuyers, charging them higher mortgage rates. And new research may corroborate the Justice Department's belief that there's systemic discrimination in the housing market: A paper for the National Bureau of Economic Research finds that black and Hispanic homebuyers pay more for their homes, irregardless of their income, wealth, and credit profiles.

Rick Wilking (Reuters)

Researchers examined 2 million housing sales in four different cities and found that black and Hispanic homebuyers pay about 3 percent more than white homebuyers.

The price differences aren't linked to household income, wealth, or access to credit, and they don't depend the racial makeup of the neighborhood or the race of the seller, the researchers note. So what explains the premium that minority homebuyers end up paying? The paper explains that discrimination could be a factor, as well as relative inexperience with homebuying within black and Hispanic communities.

Finally, they point out that black and Hispanic homebuyers may be less willing to spend as much time searching for homes, in part "because of the expectation of discriminatory treatment in the market." Knowing this, "sellers might statistically discriminate by holding out for a higher price (i.e., use a higher reservation price) in negotiations," the paper concludes.

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