Heterogeneity in hedonic modelling of house prices: looking at buyers’ household profiles (original) (raw)

New empirical evidence on heteroscedasticity in hedonic housing models

Journal of Housing Economics, 2004

This paper reexamines the issue of heteroscedasticity in hedonic house price models. The paper uses data for Boston, which has a high average age of dwelling. The results largely support previous Wndings with evidence of heteroscedasticity with respect to the age of dwelling. The iterative GLS correction, speciWed in terms of age, eliminates all heteroscedasticity at both aggregate and disaggregate levels. However, tests for heteroscedasticity with respect to living area show that the GLS models report signiWcant Wndings. In addition, a more general EGLS approach does not even eradicate heteroscedasticity with respect to age. Evidence is presented that would support the estimation of hedonic models at a disaggregate level. It is hypothesised that this is due a greater level of homogeneity in the sample at a submarket level, leading to a reduction in reported heteroscedasticity with respect to both age and living area.

Dwelling Age Heteroskedasticity in Hedonic House Price Equations: An Extension

In an earlier article, we used an iterative generalized least squares procedure with an explicit model for the residual variance to examine whether the residual variance in hedonic house price equations is systematically related to dwelling age. We related transaction price to dwelling size, dwelling age, and period of sale. Our model (using data for 8,476 sales of single-family homes in Dallas during 1984 and 1985) explained more than 80 percent of the variance in the logarithm of prices. This article extends our earlier work. First, we incorporate additional structural characteristics into the hedonic specification. Second, we control for neighborhood characteristics by using elementary school boundaries to define submarkets, and we examine submarket heteroskedasticity for single-family homes sold between the fourth quarter of 1991 and the first quarter of 1993. We find compelling evidence of dwelling-age-related heteroskedasticity for half the submarkets examined and for all area...

Estimation of Hedonic Single-Family House Price Function Considering Neighborhood Effect Variables

Sustainability, 2014

In this study, hedonic house price functions are formulated using the single-family house market in the 23 wards of Tokyo as the subject. In the formulation of hedonic models, the generation of omitted variable bias is thought to occur in cases when, in addition to locational factors (i.e., factors involved in decision making when buying a property) and building structures which affect the house prices, local environmental variables and the individual characteristics of house buyers, such as their income, are not taken into consideration. However, since it is difficult to obtain local environmental information in a small neighborhood unit and to observe individual characteristics of house buyers in the property market, these variables have not been sufficiently considered in previous studies. In the current study, I aim to improve the hedonic model by incorporating local environmental factors and data on family income in a small neighborhood unit using a geographic information system (GIS). I demonstrate that, without considering these variables, non-negligible levels of omitted variable bias are generated in the variables that are major factors in determining house prices, such as ground area, front road width, distance to the nearest station, and the travel time to the central business district.

ESTIMATING HEDONIC HOUSING PRICE MODELS: EVIDENCE FROM BARCELONA

2019

This study analyzes the main components which affect house prices level in Barcelona. A house is made up of different characteristics and features, which affect its value. The characteristics analyzed in this study, are internal (house features) and external, like the local amenities where the house is located. The analysis covers different types of local amenities, from basic services to more complex ones like leisure facilities for each neighborhood. Furthermore, the presence of green areas such as parks, beaches or forest, cultural heritage of the city and tourist hotspots it has been taken into account. Socioeconomics variables are also used, which are variables that characterize the neighborhoods itself, those are, among others, the unemployment rate and the average price of rental housing. The Cross-sectional dataset includes more than 4000 transactions in 2016 in the city of Barcelona, was used to estimate hedonic models. The hedonic model includes the characteristics of the houses and the neighborhood amenities where the houses are located. We will analyze those with Ordinary Least Square (OLS) method to estimate the marginal contribution to value.

Hedonic prices, price indices and housing markets

Journal of Urban Economics, 1978

This. paper extends hedonic price analysis to the formation of housing price indices measuring variation within a metropolitan area. In forming these indices fifteen submarkets, heterogeneous across time and space, are described within a short-run equilibrium model. Linear functional forms are generally rejected using a method proposed by Box and Cox. Aggregation of hedonic price coefficients into standardized units yields significantly higher housing prices in the central city than in its suburbs, as well as differential effects of structural and neighborhood improvements among submarkets.

Evaluating Housing Price Predictability of Alternative Hedonic Model Formulations

2006

We first use alternative hedonic model formulations to compare predicted and observed prices of property transactions in alternative locations. The estimation of model parameters is based on data from Western Norway, and the model formulations differ with respect to the representation of spatial structure. We discuss how measures like the distance to the cbd, a gravity based accessibility measure of labor market accessibility, and some local characteristics of the geography, contribute to predict spatial variations in housing prices.

HEDONIC PRICE MODEL AND ITS APPLICATION TO THE HOUSING MARKET (LITERATURE REVIEW)

This study aims to review the extensive literature on the use of hedonic models (HM) for house’s price evaluation. It highlights the performance of HM, as a result of inclusion in the model of physical, neighborhood and location characteristics of the property, among others. In addition to theoretical analysis of HM specification it is explored how the HM is applied in different countries, in order to identify similarities that may arise in the application of hedonic pricing model for Tirana. Review of the literature recalls some empirical issues concerning the specification of HMs, such as segmentation and its role in HMs performance, selection of functional form of the model, as well as the selection and measurement of dependent and independent variables in the model.

An Application of Spatial Econometrics in Relation to Hedonic House Price Modelling

2010

This paper applies spatial econometrics in relation to hedonic house price modeling. Some basic spatial model alternatives are used for a battery of relevant tests. Geographically-weighted regression, semiparametric analysis, and the mixed spatial Durbin model are also applied. The purpose is to detect missing spatial variables, misspecified functional form, and spatial heterogeneity in estimated parameters. Such misspecifications have been shown to give spurious results in relation to some frequently used directional based tests. Significant model improvement is achieved, so the paper should be of general interest as an example of practical econometric modeling within the field.