Economics Seminar Series with Lu Han

Lu Han is the Nathan F. Brand Chair Professsor in Real Estate and Urban Economics at Wisconsin School of Business.  She will be presenting 

Not All Bids Are Equal: Racial Gaps in the Housing Market

Abstract:  We study racial disparities in housing transactions using novel data that describe the full set of offers submitted for residential properties, including both accepted and rejected bids. Leveraging within-listing comparisons across competing offers, we show that while bidders of color submit lower bids on average, a significant “acceptance gap” remains. Even after controlling for bid amount, bid rank, buyer agent, and detailed offer terms, bidders of color are significantly less likely to have their offers accepted for the same listing. We quantify this disparity in the form of the bid-equivalent penalty: to achieve the same probability of acceptance as a white buyer, a buy of color must bid approximately 2 – 3 percent more. These disparities intensify in tighter markets (# buyers to # listing ratio), in listings with more competing bidders, and when the seller is white – scenarios where sellers possess greater market power and where the identity of the marginal buyer is perceived as consequential. Taken together, our results are difficult to reconcile with explanations based solely on buyer preferences, financing constraints, or search costs. Rather, they point to differential acceptance thresholds applied by sellers