Can Urban Indicators Predict Home Price Appreciation? Implications for Redlining Research

Ying Li and Eric Rosenblatt

Real Estate Economics, 1997, vol. 25, issue 1, 81-104

Abstract: Economists commonly control for neighborhood indicators, such as median income, in underwriting models that test for redlining. Many such indicators are highly correlated with neighborhood racial composition and therefore have the capacity to “explain away” the role of race in lending decisions. This paper argues that indicators should be included in models of underwriting only if they affect future home prices, and hence the value of the default option, in a consistent fashion. Testing the effect of nine census variables, taken from two recent redlining papers, on California tract appreciation from 1986 to 1994, a consistent relationship between indicators and home price is not found.

Date: 1997
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