Theoretical and Empirical Considerations Regarding Space in Hedonic Housing Price Model Applications

Recent advances in spatial data analysis are making their way into a variety of applied research settings. Once purely the domain of specialists, increased availability of both spatial data and the software with which to handle them, spatial analysis techniques are diffusing into other areas of research. This article first details the rationale and need for spatial considerations in hedonic price models and focuses on the link between the context of the housing market and the statistical considerations necessary when dealing with spatial data. These issues are then explored via an application to the housing market of Cuyahoga County, Ohio. It was found, first, that explicit modeling of space is not always warranted. One of our two models shows no substantial signs of spatial misspecification. However, in the second model, where diagnostic tests call for the explicit modeling of space, some drastic differences were found between the space-neglected model and the more correctly specified spatial hedonic model. This highlights the need to include spatial diagnostics as part of the standard model-fitting procedure for hedonic house price applications. Copyright 2001 Gatton College of Business and Economics, University of Kentucky.

[1]  Daniel A. Griffith,et al.  Efficiency of least squares estimators in the presence of spatial autocorrelation , 1993 .

[2]  Luc Anselin,et al.  Spatial econometrics in practice : A review of software options , 1992 .

[3]  M. Cadwallader,et al.  Husband-wife role variation as a factor in home area definition , 1981 .

[4]  Margaret A. Nemeth,et al.  Applied Multivariate Methods for Data Analysis , 1998, Technometrics.

[5]  R. Dubin.  Spatial autocorrelation and neighborhood quality , 1992 .

[6]  A. M. FreemanIII,et al.  Hedonic Prices, Property Values and Measuring Environmental Benefits: A Survey of the Issues , 1979 .

[7]  Jon P. Nelson,et al.  Residential choice, hedonic prices, and the demand for urban air quality , 1978 .

[8]  John F. Kain,et al.  Measuring the Value of Housing Quality , 1970 .

[9]  R. Pace,et al.  Spatial Autoregression Techniques for Real Estate Data , 1999 .

[10]  D. E. Clark,et al.  Nuclear Power Plants and Residential Housing Prices , 1997 .

[11]  Peter Linneman,et al.  Some empirical results on the nature of the hedonic price function for the urban housing market , 1980 .

[12]  Radcliffe G. Edmonds.  A Theoretical Basis for Hedonic Regression: A Research Primer , 1984 .

[13]  S. Basu,et al.  Analysis of Spatial Autocorrelation in House Prices , 1998 .

[14]  J. Mark.  A Preference Approach to Measuring the Impact of Environmental Externalities , 1980 .

[15]  J. Nellis,et al.  The application of hedonic indexing methods: A study of house prices in the United Kingdom , 1985 .

[16]  V. Smith,et al.  MEASURING THE IMPACT OF AIR POLLUTION ON PROPERTY VALUES , 1975 .

[17]  Hae-shin Hwang,et al.  Hedonic housing price indices and secondary employment centers , 1985 .

[18]  Peter T. Chinloy.  Hedonic price and depreciation indexes for residential housing: A longitudinal approach☆ , 1977 .

[19]  Allen C. Goodman,et al.  Permanent income, hedonic prices, and demand for housing: New evidence , 1982 .

[20]  H. White.  A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity , 1980 .

[21]  Mingche M. Li,et al.  Micro-Neighborhood Externalities and Hedonic Housing Prices , 1980 .

[22]  Ronald P. Barry,et al.  Spatiotemporal Autoregressive Models of Neighborhood Effects , 1998 .

[23]  M. Feldstein.  Inflation, Tax Rules, and Investment: Some Econometric Evidence , 1980 .

[24]  T. Thibodeau,et al.  Microeconomic Estimates of Housing Depreciation , 1987 .

[25]  Otto A. Davis,et al.  Urban Property Markets: Some Empirical Results and Their Implications for Municipal Zoning , 1967, The Journal of Law and Economics.

[26]  Thomas D. Crocker,et al.  Air Pollution and Residential Property Values , 1971 .

[27]  Robert E. Lucas,et al.  HEDONIC PRICE FUNCTIONS , 1975 .

[28]  Ronald P. Barry,et al.  Spatial Statistics and Real Estate , 1998 .

[29]  Harry W. Richardson,et al.  Determinants of Urban House Prices , 1974 .

[30]  P. Moran.  The Interpretation of Statistical Maps , 1948 .

[31]  John A. Henning,et al.  The Determinants of Residential Property Values with Special Reference to Air Pollution , 1967 .

[32]  K. Lancaster.  A New Approach to Consumer Theory , 1966, Journal of Political Economy.

[33]  Richard L. Scheaffer,et al.  Elementary Survey Sampling , 1971 .

[34]  Robert A. Simons,et al.  The Value Impact of New Residential Construction and Neighborhood Disinvestment on Residential Sales Price , 1998 .

[35]  J. Spitzer,et al.  A Primer on Box-Cox Estimation , 1982 .

[36]  A. Witte,et al.  An Estimate of a Structural Hedonic Price Model of the Housing Market: An Application of Rosen's Theory of Implicit Markets , 1979 .

[37]  R. Geary,et al.  The Contiguity Ratio and Statistical Mapping , 1954 .

[38]  Arthur Getis.  Screening for spatial dependence in regression analysis , 1990 .

[39]  W. Randolph.  Estimation of housing depreciation: Short-term quality change and long-term vintage effects , 1988 .

[40]  R. Wilkinson.  House Prices and the Measurement of Externalities , 1973 .