Faculty Publications

The Dynamics Of Location In Home Price

Document Type

Article

Keywords

geostatistical modeling, hedonic models, index construction, spatio-temporal process

Journal/Book/Conference Title

Journal of Real Estate Finance and Economics

Volume

29

Issue

2

First Page

149

Last Page

166

Abstract

It is well established that house prices are dynamic. It is also axiomatic that location influences such selling prices, motivating our objective of incorporating spatial information in explaining the evolution of house prices over time. In this paper, we propose a rich class of spatio-temporal models under which each property is point referenced and its associated selling price modeled through a collection of temporally indexed spatial processes. Such modeling includes and extends all house price index models currently in the literature, and furthermore permits distinction between the effects of time and location. We study single family residential sales in two distinct submarkets of a metropolitan area and further categorize the data into single- and multiple-transaction observations. We find the spatial component is very important in explaining house price. Moreover, the relative homogeneity of homes within the submarket and the frequency with which homes sell affects the pattern of variation across space and time. Differences between single and repeat sale data are evident. The methodology is applicable to more general capital asset pricing when location is anticipated to be influential.

Department

Department of Mathematics

Original Publication Date

9-1-2004

DOI of published version

10.1023/B:REAL.0000035308.15346.0a

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