Appraisal gap worsened as racial disparity persists

Home values in white neighborhoods increased more than in communities of color

Appraisal gap worsened
(Illustration by The Real Deal with Getty)

Home appraisals shot up across the country in recent years, especially during the pandemic. But the racial gap in appraisals has only worsened.

Sociologists Junia Howell and Elizabeth Korver-Glenn published a report this week about the growing appraisal gap, Bloomberg reported. The report relies on data released by the Federal Housing Finance Agency, a collection of more than 47 million appraisal records dating back to 2013.

Since 2020, homes in mostly white neighborhoods increased in value by an average of $136,000, the report stated. Homes in mostly non-white neighborhoods, however, only increased by an average of $60,000.

In the hottest housing markets, the gap widened to nearly three times the rate of more stable markets.

Since 2013, homes in white communities have been appraised on average as being $371,000 more valuable than homes in non-white communities. The appraisal gap surged 75 percent, most acutely in American Indian, Alaska Native, Southeast Asian and Pacific Islander communities.

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The report made two recommendations: a revised approach to appraisals within the industry and reparations for victims of the appraisal gap.

Appraisers use comparable sales to make assessments. But systemic racial bias has seeped into the process, as the longtime discrepancy between valuations in white and non-white communities perpetuates a cycle of disparity. At times, racial bias has become more explicit, such as tales of Black homeowners removing evidence of their race during appraisals, landing higher valuations than when that evidence remains in the home.

In March, the Biden administration unveiled a five-point plan to combat racial bias in appraisals and home lending. The plan called for appraisers to receive clear guidance on anti-discrimination laws and for violations to be enforced more strongly.

Unconscious bias may be coupled with the makeup of the industry. The appraisal workforce is 97 percent white, something the administration’s task force is looking to diversify.

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— Holden Walter-Warner