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Spatial Autocorrelations and Urban Housing Market Segmentation

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  • Yong Tu

    ()

  • Hua Sun
  • Shi-Ming Yu
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Abstract

This paper seeks to let data define urban housing market segments, replacing the conventional administrative or any pre-defined boundaries used in the previous housing submarket literature. We model housing transaction data using a conventional hedonic function. The hedonic residuals are used to estimate an isotropic semi-variogram, from which residual variance–covariance matrix is constructed. The correlations between hedonic residuals are used as identifier to assign housing units into clusters. Standard submarket identification tests are applied to each cluster to examine the segmentation of housing market. The results are compared with the prevailing structure of market segments. Weighted mean square test shows that the defined submarket structure can improve the precision of price prediction by 17.5%. This paper is experimental in the sense that it represents one of the first attempts at investigating market segmentation through house price spatial autocorrelations. Copyright Springer Science+Business Media, LLC 2007

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Bibliographic Info

Article provided by Springer in its journal The Journal of Real Estate Finance and Economics.

Volume (Year): 34 (2007)
Issue (Month): 3 (April)
Pages: 385-406

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Handle: RePEc:kap:jrefec:v:34:y:2007:i:3:p:385-406

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Web page: http://www.springerlink.com/link.asp?id=102945

Related research

Keywords: Housing submarket; Isotropic semi-variogram; Price spatial autocorrelation;

References

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  1. Basu, Sabyasachi & Thibodeau, Thomas G, 1998. "Analysis of Spatial Autocorrelation in House Prices," The Journal of Real Estate Finance and Economics, Springer, vol. 17(1), pages 61-85, July.
  2. John M. Clapp & Hyon-Jung Kim & Alan E. Gelfand, 2002. "Predicting Spatial Patterns of House Prices Using LPR and Bayesian Smoothing," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 30(4), pages 505-532.
  3. Dale-Johnson, David, 1982. "An alternative approach to housing market segmentation using hedonic price data," Journal of Urban Economics, Elsevier, vol. 11(3), pages 311-332, May.
  4. Straszheim, Mahlon R, 1974. "Housing Market Discrimination and Black Housing Consumption," The Quarterly Journal of Economics, MIT Press, vol. 88(1), pages 19-43, February.
  5. Mahlon R. Straszheim, 1975. "An Econometric Analysis of the Urban Housing Market," NBER Books, National Bureau of Economic Research, Inc, number stra75-1, July.
  6. Allen, Marcus T & Springer, Thomas M & Waller, Neil G, 1995. "Implicit Pricing across Residential Rental Submarkets," The Journal of Real Estate Finance and Economics, Springer, vol. 11(2), pages 137-51, September.
  7. Goodman, Allen C. & Thibodeau, Thomas G., 1998. "Housing Market Segmentation," Journal of Housing Economics, Elsevier, vol. 7(2), pages 121-143, June.
  8. Gillen, Kevin & Thibodeau, Thomas & Wachter, Susan, 2001. "Anisotropic Autocorrelation in House Prices," The Journal of Real Estate Finance and Economics, Springer, vol. 23(1), pages 5-30, July.
  9. Clapp, John M. & Wang, Yazhen, 2006. "Defining neighborhood boundaries: Are census tracts obsolete?," Journal of Urban Economics, Elsevier, vol. 59(2), pages 259-284, March.
  10. John F. Kain & John M. Quigley, 1975. "Housing Markets and Racial Discrimination: A Microeconomic Analysis," NBER Books, National Bureau of Economic Research, Inc, number kain75-1, July.
  11. Capone, Charles Jr. & Goldberg, Lawrence, 2001. "Renter Mobility and Multifamily Mortgage Default Risk," Journal of Housing Economics, Elsevier, vol. 10(1), pages 21-40, March.
  12. Steven C. BOURASSA & Martin HOESLI & Vincent S. PENG, 2002. "Do Housing Submarkets Really Matter?," FAME Research Paper Series rp58, International Center for Financial Asset Management and Engineering.
  13. Schnare, Ann B. & Struyk, Raymond J., 1976. "Segmentation in urban housing markets," Journal of Urban Economics, Elsevier, vol. 3(2), pages 146-166, April.
  14. Pace, R Kelley, et al, 1998. "Spatiotemporal Autoregressive Models of Neighborhood Effects," The Journal of Real Estate Finance and Economics, Springer, vol. 17(1), pages 15-33, July.
  15. Lapham, Victoria, 1971. "Do Blacks Pay More for Housing?," Journal of Political Economy, University of Chicago Press, vol. 79(6), pages 1244-57, Nov.-Dec..
  16. Bourassa, Steven C. & Hamelink, Foort & Hoesli, Martin & MacGregor, Bryan D., 1999. "Defining Housing Submarkets," Journal of Housing Economics, Elsevier, vol. 8(2), pages 160-183, June.
  17. Craig A Watkins, 2001. "The definition and identification of housing submarkets," Environment and Planning A, Pion Ltd, London, vol. 33(12), pages 2235-2253, December.
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Cited by:
  1. Liang, Te-Hsin & Lin, Jian-Bang, 2014. "A two-stage segment and prediction model for mortgage prepayment prediction and management," International Journal of Forecasting, Elsevier, vol. 30(2), pages 328-343.
  2. Polyakov, Maksym & Pannell, David J. & Pandit, Ram & Tapsuwan, Sorada & Park, Geoff, 2012. "Valuing environmental assets on rural lifestyle properties," Working Papers 126941, University of Western Australia, School of Agricultural and Resource Economics.

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