Homes in Black neighborhoods are undervalued by $46,000 on average, according to a recent study conducted by a national real estate brokerage.
Redfin senior economist and lead author of the analysis Reginald Edwards said “bias” explains the persistent disparity which leaves Black Americans at a disadvantage in the U.S. housing market.
According to Redfin’s analysis of the housing market from 2013 to February 2021, homes in mostly Black areas have been consistently undervalued by tens of thousands of dollars even “after accounting for fundamental factors that contribute to home values, like square footage and walkability.”
The disparity measures how Black families continue to suffer the consequences of discriminatory housing policies like redlining and bias in lending and appraisals.
“Our analysis rules out all the factors that are typically associated with home value and still finds a significant difference between the values of otherwise nearly identical homes in similar Black and White neighborhoods,” said Edwards. “We’re left with bias and systemic racism to explain the variation in home values.”
While considering factors that contribute to home value, like such as size, condition, neighborhood amenities and schools, a home in a Black neighborhood is undervalued by an average of $46,000 when compared to a comparable home in a mostly white area.
“Today’s Black homeowners are missing out on $46,000 worth of wealth due to racist housing policies that were outlawed in the 1960s and continuing biases among homebuyers and housing professionals in parts of their homebuying process like appraisals and mortgage lending—and that’s $46,000 that would multiply as the years go on and benefit future generations,” Edwards said.
The disparity remains a significant contributing factor to the racial wealth gap as Black Americans are unable to maximize usage of home ownership as a major wealth-building tool.
Black Americans are less likely to own homes than white Americans and typically have less equity. In January 2021, median home equity stood at $89,000 for Black families compared to $113,000 for white families.
Because Black residents often have less access to green spaces and live near schools more likely to be underfunded, homes in Black neighborhoods are also undervalued in ways that aren’t measured by the study.
“No real progress on the racial home-value gap has been made over the last decade, which highlights the depth of the problem and how difficult it is to change,” said Redfin Chief Economist Daryl Fairweather. “There isn’t a policy that would make people less prejudiced. We would need to see a broad cultural shift in the way homebuyers view neighborhoods that are predominantly Black…Unfortunately, the longer Black Americans have lower home values than their white counterparts, the longer they are missing out on wealth that could be used for other investments and to pass along to their children.”