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Now You See It, Now You Don't: Why Do Real Estate Agents Withhold Available Houses from Black Customers?

This paper develops a new approach to testing hypotheses about the causes of discrimination in housing sales. We follow previous research by using data from fair housing audits, a matched-pair technique for comparing the traetment of equally qualified black and white home buyers. Our contribution is to shift the focus from differences in the treatment of teammates during an audit to agent decisions concerning an individual housing unit. Our sample consists of all units seen by either a black of a white auditor in the 1989 national Housing Discrimination Study. We estimate a multinomial logit model to explain a real estate agent's joint decisions concerning whether to show each unit to a white auditor and to a black auditor. We find evidence that real estate agents make and act upon inferences about a customer's preferences on the basis of the customer's initial inequity and that agents practice redlining, defined as the withholding of units in integrated neighborhoods. We find little evidence to support the conclusion that agents discriminate because of their own prejudice, but some evidence that they discriminate because of the prejudice of their white customes. More importantly, we find strong evidence of statistical discrimination; agents withhold houses from blacks when the probability of a successful transaction is perceived to be low.

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Paper provided by Center for Policy Research, Maxwell School, Syracuse University in its series Center for Policy Research Working Papers with number 24.

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Length: 35 pages
Date of creation: May 2000
Date of revision:
Handle: RePEc:max:cprwps:24
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  1. Canopy Roychoudhury & Allen C. Goodman, 1996. "Evidence of Racial Discrimination in Different Dimensions of Owner-Occupied Housing Search," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 24(2), pages 161-178.
  2. Roychoudhury, Canopy & Goodman, Allen C., 1992. "An ordered probit model for estimating racial discrimination through fair housing audits," Journal of Housing Economics, Elsevier, vol. 2(4), pages 358-373, December.
  3. Courant, Paul N., 1978. "Racial prejudice in a search model of the urban housing market," Journal of Urban Economics, Elsevier, vol. 5(3), pages 329-345, July.
  4. George Galster, 1990. "Racial steering in urban housing markets: A review of the audit evidence," The Review of Black Political Economy, Springer, vol. 18(3), pages 105-129, December.
  5. Page Marianne, 1995. "Racial and Ethnic Discrimination in Urban Housing Markets: Evidence from a Recent Audit Study," Journal of Urban Economics, Elsevier, vol. 38(2), pages 183-206, September.
  6. Yinger, John, 1997. "Cash in Your Face: The Cost of Racial and Ethnic Discrimination in Housing," Journal of Urban Economics, Elsevier, vol. 42(3), pages 339-365, November.
  7. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-61, September.
  8. Helen F. Ladd, 1998. "Evidence on Discrimination in Mortgage Lending," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 41-62, Spring.
  9. George Galster, 1990. "Racial steering by real estate agents: Mechanisms and motives," The Review of Black Political Economy, Springer, vol. 19(1), pages 39-63, June.
  10. Ondrich, Jan & Ross, Stephen L. & Yinger, John, 2000. "How Common is Housing Discrimination? Improving on Traditional Measures," Journal of Urban Economics, Elsevier, vol. 47(3), pages 470-500, May.
  11. Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 2, number 9780226041162.
  12. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March.
  13. Turner, Margery Austin & Mikelsons, Maris, 1992. "Patterns of racial steering in four metropolitan areas," Journal of Housing Economics, Elsevier, vol. 2(3), pages 199-234, September.
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