Why Do Only White People Sell Houses?

The past three years have yielded surprising statistics in the National Association of Realtors annual “Profile of Buyers and Sellers.”  More than 90 percent of home buyers in the United States self-reported as “White/Caucasian.”

By multiplying homeownership rates by race with the overall population by race, it would be expected Caucasians would account for 85 percent of the home-buying market. For the past three years however, this percentage is in the range of 93 to 94 percent of the market.

So why is it that White/Caucasians account for a larger percent of the market than expected in the past three years?

The team at the real estate blog SpotProperty gave several possible causes for the disparity between expected market share and actual market share:

• Income disparities

• Sampling bias

• Discrimination

Income Disparities

The argument for why income disparities play into the difference between the two figures can be shown with a fairly simple argument:

• One: Wealthier individuals own homes

• Two: White people tend to be wealthier

• Therefore: A higher percentage of home owners tend to be white

To elaborate, based on information from the NAR and the United State’s Housing Department, typical home sellers are older and wealthier than the average American. 

The median age of all home sellers in 2011 was 53 years and the median household income was $101,500. This figure is in stark contrast to the United State’s median household income, which sits at $64,200. When these two figures are compared, it’s obvious that home sellers are wealthier than the typical American.

Furthermore, data from the National Association of Home Builders (NAHB) shows in 2010 Caucasians had a substantially higher yearly household income than other self-reported races. NAHB stated that Caucasians had a yearly income of $69,000. This is higher than Blacks ($42,300), Hispanics ($44,000), and American Indians/ Alaska Natives ($43.200). Nevertheless, Asians had a higher household income level, earning $80,500 a year.

Given this information, it should not come as a surprise that Caucasians have a disproportionately larger share of the home-selling market. Still, this fact cannot fully explain the huge disparity as Asians do not display the same disproportionate market share given their higher earnings.

One explanation might be the virtuous cycle of homeownership. In other words, owning a home makes you wealthier over time and increases your ability to purchase a home. In the United States, Caucasians have held homes for longer. Because of racism, past and present, Caucasians have amassed a larger share of the housing market than would have been expected.

Sampling Bias

One possible explanation for the overwhelming majority of home sellers being White/Caucasian is that they were the only ones to answer the survey. A classic example of sampling bias occurs with telephone surveys: only people with telephones can be surveyed! It’s possible that NAR only sent the survey to people who had a higher chance of being Caucasian. However, that does not seem to be the case.

From the methodology section of the survey:

In July 2011, NAR mailed out a questionnaire survey to a random sample of 80,099 recent home buyers. The recent home buyers had to have purchased a home between July of 2010 and June of 2011. The Tailored Survey Design Method was used to survey the sample… After accounting for undeliverable questionnaires, the survey had an adjusted response rate of 7.3 percent… Information about sellers comes from those buyers who also sold a home.

Because the sample was randomly taken from the whole population of buyers, there shouldn’t have been any bias on the part of NAR regarding who received the survey. The bias would then have to lie in the people who decided to fill out the survey. We can’t think of any reason why Caucasian buyers would be more likely than other races to reply, so the bias should be rather small, if it exists at all.

Discrimination

There is more than likely some form of racial discrimination going on in the housing market. There have been numerous reports and articles demonstrating discrimination in mortgage lending, which would affect minorities’ access to housing. It is impossible to fairly assess discrimination in housing, but it is fair to say it plays a part.

Additionally, past racism could also be contributing to the current rate of Caucasian home sellers. Because of past racism, Caucasians amassed a larger-than-expected share of the housing market. This initial advantage has led them to maintain a higher-than-expected rate of homeownership into present times, as owning a house has led to greater wealth.

Summary

In conclusion, while there are three areas that might help explain why Caucasians make such a large percentage of home sellers, the real cause is likely a combination of income disparities, sampling bias, and discrimination such as historical racism.

Via SpotProperty