“Property Values Drop When Blacks Move In,Because…”: Racial and Socioeconomic Determinants of Neighborhood Desirability *

Abstract

Are housing prices lower in neighborhoods with high concentrations of black residents? If so, is this relationship evidence of pure discrimination, or can it be explained by considering nonracial neighborhood traits? These questions derive their importance from the link between mobility patterns and residential segregation, and the consequent relationship between high levels of segregation and a host of deleterious outcomes. I assess the magnitude and motivations of racial aversion by conducting a hedonic price analysis of geocoded data from the Panel Study of Income Dynamics. I find clear evidence of lower property values in neighborhoods with relatively high proportions of black residents. However, whether it is blacks’ race or their socioeconomic status that affects property values depends on whether housing units are rented or owner-occupied.