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How informative are average effects? Hedonic regression and amenity capitalization in complex urban housing markets

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  • Redfearn, Christian L.
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    Abstract

    Variations in real estate prices within an urban area are commonly exploited to value local amenities. Be they public or private goods, local amenities should be capitalized into property prices. This paper, however, demonstrates that standard hedonic models used to recover implicit prices are highly sensitive to sample choice and to model specification. In the case of Los Angeles, complex local housing markets produce attribute prices that vary spatially and temporally, violating the common assumption they are fixed. This misspecification yields estimated average effects of the value of access to light rail stations that vary widely across seemingly innocuous choices regarding samples and model specification. The paper proposes an alternative, more flexible approach, which yields a finding of no capitalization of light rail access into surrounding home prices.

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    Bibliographic Info

    Article provided by Elsevier in its journal Regional Science and Urban Economics.

    Volume (Year): 39 (2009)
    Issue (Month): 3 (May)
    Pages: 297-306

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    Handle: RePEc:eee:regeco:v:39:y:2009:i:3:p:297-306

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    Web page: http://www.elsevier.com/locate/regec

    Related research

    Keywords: Hedonic analysis Amenity capitalization Locally-weighted regression Urban housing markets Housing submarkets;

    References

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    Citations

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    Cited by:
    1. Sunding, David L. & Swoboda, Aaron M., 2010. "Hedonic analysis with locally weighted regression: An application to the shadow cost of housing regulation in Southern California," Regional Science and Urban Economics, Elsevier, vol. 40(6), pages 550-573, November.
    2. Partridge, Mark D. & Rickman, Dan S., 2012. "Integrating regional economic development analysis and land use economics," MPRA Paper 38291, University Library of Munich, Germany.
    3. Marco Helbich & Wolfgang Brunauer & Eric Vaz & Peter Nijkamp, 2013. "Spatial Heterogeneity in Hedonic House Price Models: The Case of Austria," Tinbergen Institute Discussion Papers 13-171/VIII, Tinbergen Institute.
    4. Sebastian Brandt & Wolfgang Maennig, 2012. "The impact of rail access on condominium prices in Hamburg," Transportation, Springer, vol. 39(5), pages 997-1017, September.
    5. Rickman, Dan S., 2009. "Neighborhood Historic Preservation Status and Housing Values in Oklahoma County, Oklahoma," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 39(2).
    6. Koster, Hans R.A. & van Ommeren, Jos & Rietveld, Piet, 2014. "Estimation of semiparametric sorting models: Explaining geographical concentration of business services," Regional Science and Urban Economics, Elsevier, vol. 44(C), pages 14-28.
    7. Waltert, Fabian & Schläpfer, Felix, 2010. "Landscape amenities and local development: A review of migration, regional economic and hedonic pricing studies," Ecological Economics, Elsevier, vol. 70(2), pages 141-152, December.
    8. Billings, Stephen B., 2011. "Estimating the value of a new transit option," Regional Science and Urban Economics, Elsevier, vol. 41(6), pages 525-536.
    9. Garcia-López, Miquel-Àngel, 2012. "Urban spatial structure, suburbanization and transportation in Barcelona," Journal of Urban Economics, Elsevier, vol. 72(2), pages 176-190.

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