Author(s): Daniel Grodzicki, Sean Cannon, Christopher W. Davis, and Ken Lam
Abstract: We study how the share of African American residents in a neighborhood impacts appraisers’ valuation decisions for home purchases. Controlling for many appraisal inputs, including the appraiser themselves, we find that appraisals below the contract price are at least 23 percent more likely in majority African American neighborhoods relative to similar neighborhoods with no African American residents. Instrumental variable estimates, based on historical shares, indicate an impact of at least 13 percent. However, this effect dissipates when an appraiser works in neighborhoods in which they have appraised before or in which many appraisals were recently completed, facts consistent with an information based mechanism.