Racial and ethnic price differentials in a small urban housing market

This article examines whether the presence of blacks and Hispanics has a negative impact on prices in a small urban housing market in the US. To alleviate estimation biases associated with unobserved neighborhood heterogeneity, we focus on housing price differences across micro-neighborhoods in the small and relatively homogeneous city of Kingston, New York, introduce GIS-based spatial amenity variables as controls, and account for clustered errors, neighborhood fixed effects, spatial errors and spatial lags. Our results, with the exception of the spatial error model, conform with the consensus reached primarily from studies of large cities that the presence of blacks in a neighborhood is associated with lower housing prices and that the impact of the presence of Hispanics is considerably weaker. The spatial error model yields weaker and statistically insignificant results for blacks, providing some evidence that price discounts in relatively black neighborhoods may be caused not by preferences for segregation but by the correlation of race and the quality of neighborhood amenities.