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Can Urban Indicators Predict Home Price Appreciation? Implications for Redlining Research

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  • Ying Li
  • Eric Rosenblatt

Abstract

Economists commonly control for neighborhood indicators, such as median income, in underwriting models that test for redlining. Many such indicators are highly correlated with neighborhood racial composition and therefore have the capacity to “explain away” the role of race in lending decisions. This paper argues that indicators should be included in models of underwriting only if they affect future home prices, and hence the value of the default option, in a consistent fashion. Testing the effect of nine census variables, taken from two recent redlining papers, on California tract appreciation from 1986 to 1994, a consistent relationship between indicators and home price is not found.

Suggested Citation

  • Ying Li & Eric Rosenblatt, 1997. "Can Urban Indicators Predict Home Price Appreciation? Implications for Redlining Research," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 25(1), pages 81-104, March.
    • Handle: RePEc:bla:reesec:v:25:y:1997:i:1:p:81-104
    DOI: 10.1111/1540-6229.00708
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    Cited by:

    1. Ethan Cohen-Cole, 2008. "Credit card redlining," Supervisory Research and Analysis Working Papers QAU08-1, Federal Reserve Bank of Boston.
    2. Liang Peng & Lei Zhang, 2021. "House Prices and Systematic Risk: Evidence from Microdata," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(4), pages 1069-1092, December.
    3. An, Galina & Becker, Charles & Cheng, Enoch, 2021. "Housing price appreciation and economic integration in a transition economy: Evidence from Kazakhstan," Journal of Housing Economics, Elsevier, vol. 52(C).
    4. Weber, Rachel & Bhatta, Saurav Dev & Merriman, David, 2007. "Spillovers from tax increment financing districts: Implications for housing price appreciation," Regional Science and Urban Economics, Elsevier, vol. 37(2), pages 259-281, March.
    5. Steven C. Bourassa & Donald R. Haurin & Jessica L. Haurin & Martin Hoesli & Jian Sun, 2009. "House Price Changes and Idiosyncratic Risk: The Impact of Property Characteristics," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 37(2), pages 259-278, June.
    6. Jianhua Gang & Liang Peng & Jinfan Zhang, 2021. "Are Pricier Houses Less Risky? Evidence from China," The Journal of Real Estate Finance and Economics, Springer, vol. 63(4), pages 662-677, November.

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