What is a key reason that demographic data related to race/ethnicity cannot serve as a basis for valuation in appraisal?

The correct answer emphasizes that demographic data related to race and ethnicity cannot be used as a basis for valuation in appraisal because it contravenes fair housing regulations. The Fair Housing Act and similar regulations are designed to promote equal housing opportunities and prevent discrimination based on race, color, national origin, religion, sex, familial status, or disability. Utilizing demographic information about race and ethnicity in the valuation process can perpetuate biases and discriminatory practices, which are expressly prohibited by law. This ensures that appraisals are conducted fairly and without influence from extraneous factors that may lead to unfair treatment or discrimination against individuals or groups based on their racial or ethnic backgrounds.

This understanding is crucial for appraisers as it reinforces their responsibility to uphold ethical standards and comply with legal requirements, ultimately promoting fairness and equality in the housing market.