Home Purchase Appraisals in Minority Neighborhoods

Daniel Grodzicki, Sean Cannon, Christopher Davis and Ken Lam

No 24-06, FHFA Staff Working Papers from Federal Housing Finance Agency

Abstract: We study the impact of neighborhoods' race composition on appraisers' valuation decisions in home purchase appraisals. Controlling for many appraisal inputs, including the appraiser themselves, we find that low appraisals (below the contract price) are at least 23 percent more likely in majority African American neighborhoods relative to neighborhoods with no African American residents. Instrumental variable estimates, based on historical race shares, indicate an impact of at least 13 percent. However, this effect dissipates when appraisers work in neighborhoods in which they have appraised before or in which many appraisals were recently completed, facts consistent with information based models of discrimination.

Keywords: appraisal; discrimination; mortgage (search for similar items in EconPapers)
JEL-codes: G21 J15 R30 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2024-11
New Economics Papers: this item is included in nep-ban and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:hfa:wpaper:24-06

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