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House Price Changes and Idiosyncratic Risk: The Impact of Property Characteristics

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  • Steven C. Bourassa
  • Donald R. Haurin
  • Jessica L. Haurin
  • Martin Hoesli
  • Jian Sun

Abstract

Although the average change in house prices is related to changes in fundamentals or perhaps market‐wide bubbles, not all houses in a market appreciate at the same rate. The primary focus of our study is to investigate the reasons for these variations in price changes among houses within a market. We draw on three theories for guidance, one related to the optimal search strategy for sellers of atypical dwellings, another focusing on the bargaining process between a seller and potential buyers and the third relying on the concept of land leverage. We hypothesize that houses will appreciate at different rates depending on the characteristics of the property and the change in the strength of the housing market. These hypotheses are supported using data from three New Zealand housing markets.

Suggested Citation

  • Steven C. Bourassa & Donald R. Haurin & Jessica L. Haurin & Martin Hoesli & Jian Sun, 2009. "House Price Changes and Idiosyncratic Risk: The Impact of Property Characteristics," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 37(2), pages 259-278, June.
    • Handle: RePEc:bla:reesec:v:37:y:2009:i:2:p:259-278
    DOI: 10.1111/j.1540-6229.2009.00242.x
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    JEL classification:

    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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