New study of 12 million reviews shows racial disparity
A study by Freddie Mac of 12 million reviews showed a gap between ratings of homes in predominantly black and Latino areas and those in whites, the latest evidence of racial disparity in the housing industry.
The mortgage giant analyzed home purchase valuations from 2015 to 2020 and compared them to contract prices. The research showed gaps in the work of “a large part” of the evaluators, according to Inman. Potential factors include whether appraisers are more willing to look for comparative prices in white neighborhoods.
Using census tracts, research found that 15.4 percent of homes in predominantly Latin American areas and 12.5 percent of those in largely black areas were priced below. contract price. This compares to 7.4 percent for homes in predominantly white neighborhoods.
The study, and another last month that found lenders were more likely to turn down home loans to borrowers of color due to a hidden bias in mortgage algorithms, could give the Biden administration leverage to combat discrimination in housing and evaluation bias. The Interagency Real Estate Valuation and Valuation Working Group was launched in July and is expected to deliver a final report within the next six months.
Freddie Mac’s research showed that the gap was even more pronounced in neighborhoods where the Latino or black population was at least 80%. This increased the gap between the ratings of Latinos and Whites to 9.4% from 8%, and to 5.9% from 5.2% for Blacks.
Freddie Mac plans to continue to research the difference in valuation values. One factor could be the lack of racial diversity among reviewers: A 2018 study by the Review Institute found that 85% of reviewers were white and 78% were men.
[Inman] – Holden Walter Warner