As housing and lending companies try to eradicate racism and bias from their industries, automated valuation models could help reach that goal, according to the American Enterprise Institute.
AEI’s study showed that automated valuations with race and location removed produced a -0.7% appraisal gap between Black and white refinancings and -0.8% for purchases. However, once those characteristics were added back in, the differences widened to -2.3% for refis and -2.4% for purchases.
Appraisals stand as an ingress to the
Black households are worth 16.2% less than the typical U.S. home, according to Zillow. Latinx homes came in 10.2% below the national average, while white- and Asian-owned homes were 2.9% and 3.7% above it, respectively.
"With Black and brown communities and jobs hit disproportionately hard in the pandemic, there has been reason to worry another dip may be on the horizon that could slow or stop the progress. However, this is not the case, as the same factors that widened the gap in the Great Recession are not surfacing this time,” Zillow economist Treh Manhertz said in the company’s report.
“Thanks to rock-bottom rates on the most secure mortgages, extended forbearance programs, and rising home prices, there are no signs of another widening of the gap coming this year. However, through these turbulent times, continued vigilance and targeted intervention by policymakers is crucial to keep the progress going for communities of color.”