Hear about the Illinois REALTORS® study conducted by Dr. Marshall Jean who is a professor at the University of Chicago examining the relationship between race and home appraisals. Why did we commission the study? What were the findings?

You can read the full report, “Color and Collateral: Examining Individual and Neighborhood Effects of Race on Housing Valuation and Mortgage Lending,” here.

Full Transcript:

Kelli Jessup: Hello, and welcome to the IR weekly podcast, keeping you up to date with all the latest news in the REALTOR® world. I’m Kelli, and on today’s episode I’m talking to Gideon Blustein, Illinois REALTORS® Senior Director of Local Government and External Affairs about a recent study, Illinois REALTORS® contracted with the University of Chicago Social Sciences Professor Dr. Marshall Jean to conduct the quantitative analysis. The research examined the relationship between the race of borrowers and their homes and appraise values. So welcome Gideon.

Gideon Blustein: Glad to be here.

Kelli Jessup: Let’s jump right into it. Can you tell us the reason Illinois REALTORS® commissioned the study?

Gideon Blustein: Yes. In earlier this year, the Illinois REALTORS®, executive committee approved putting together a discriminatory appraisals task force. And one of the missions of that task force was to conduct research around racial bias in residential appraisals. So this study is actually our undertaking to really understand at a large scale quantitative level, looking at data and seeing if there is, racial bias in residential appraisals.

Kelli Jessup: All right. And what were the primary findings from the research?

Gideon Blustein: Well, we looked at home mortgage disclosure act data. So that’s federal data. It’s collected nationally by banks who then submit it to the federal government, and it’s really used to look for trends. It has been used in studies around how credit impacts different racial minorities and their access to residential lending. So this is we, our data set that we used is the home mortgage disclosure act data running from 2007 to 2020. So we’re talking about millions and millions of mortgage applications. And one of the first things that we found that really popped out at us is that over all of those years, over all of those loans, there was a substantial disparity in the denial rates of African American and white applicants. So it doesn’t matter if we were experiencing healthy economic conditions or whether it was during the recession. There was always a disparity throughout the, the couple of decades that this data represents.

Kelli Jessup: Were there any other findings from the study you want to mention to our listeners?

Gideon Blustein: Yeah. So just a couple things that I want to point out. So African American applicants in Illinois are twice as likely to have their mortgages denied due to what’s called a lack of collateral. So lack of collateral is a denial code that usually indicates a low appraisal or a low appraised value. And like I said, in Illinois African American applicants were twice as likely to be denied. So, it was 8.7 percent versus three and a half percent for white applicants. And then the last thing that really stood out to us, that was a surprise, I mean, we didn’t predict this in any way, shape or form, but what something and called neighborhood homogeneity appears to be rewarded. And what that means in, sort of everyday terms is that by census tract neighborhood, if it was more, if there was more of a single race appraiser’s apparently seem to reward that with more with higher appraisals. So if an area was all white or all black, there were fewer low appraisals or denied mortgages based on appraisal.

Kelli Jessup: Alright. So we conducted the study and those are some interesting findings. What happens next, Gideon?

Gideon Blustein: Well, the discriminatory appraisals task force, really, in addition to collecting data, conducting research, two of the other main priorities are consumer outreach and policy influence. So the first piece is if we can release this study and get it into the hands of policy makers and consumers, so that they know that here is research evidence showing that there is a problem with bias and appraisals. What that can help us do is, is really help consumers know what they can do about it. So, if they experience or they suspect that they experience bias, they can actually go and find out what to do by going to www.Illinoisrealtors.org/appraisals, or the other aspect of it is sharing this with influencers and policy makers, so that they recognize that this is a problem. And we need to look at potential solutions to this problem.

Kelli Jessup: And can you talk about what next steps that Illinois REALTORS® discriminatory appraisals task force plans take?

Gideon Blustein: So, we are currently working on a set of proposals that they might be potential legislative proposals. They might be regulatory proposals. They might just be trying to get the existing systems to work more effectively, but that’s what we’re looking at towards the next month or two is really looking at what are some, some rock solid proposals that we can do. Just one quick example that I think I can share is how do we help further diversify the appraisal industry? So, one of the problems that some researchers have focused on is fact that there are very few black residential real estate appraisers. And so what can we do to, to make that more of an attractive career path or an attractive field to try to diversify the industry? So it’s more reflective of the population of Illinois.

Kelli Jessup: Thank you, Gideon for breaking down that study and coming on the IR podcast this week.

Gideon Blustein: Thank you, Kelly. Let’s make sure our members read the study and and share it with with their communities.

Kelli Jessup: Thank you, Gideon for sharing the important information. If you’d like to learn more about appraisals and industry resources, go to staging.illinoisrealtors.org/appraisals. And that’s it for this week’s IR podcast. Thank you all for listening and as always give us a rating and review on your podcast app of choice. And if you want any more content, simply search for Illinois REALTORS® on your favorite social media app, we’ll see you next week.