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Interactive Property Valuations

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Author Info
Yannis Ioannides ()

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Abstract

This paper develops a model of housing decisions which allows for social interactions within residential neighborhoods to impact homeowners' valuation of their own properties. The model is used to structure an empirical investigation with data from the American Housing Survey for 1985 and 1989. It explores in great detail a relatively neglected feature of the data, namely the availability of data of neighborhood clusters for standard metropolitan areas in the United States. This feature of the data allows us to model empirically the effects of social interactions at the immediate residential neighborhood level, with neighborhoods consisting of a dwelling unit and its ten nearest neighbors. Most previous work on neighborhoods has used contextual information associated with the census tract where a unit of observation belongs. It identifies the effect of endogenous social interactions and find that the impact of social interactions is much more important then the dynamic (autoregressive) structure of the model when both variables are present (but both are significant). The findings provide empirical support for the notion, common in the real estate world, of the importance of neighborhood characteristics in property valuations.

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Paper provided by Department of Economics, Tufts University in its series Discussion Papers Series, Department of Economics, Tufts University with number 0102.

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Date of creation: 2001
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Handle: RePEc:tuf:tuftec:0102

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Related research
Keywords: neighborhood effects; housing; social interactions; property valuations;

Other versions of this item:

Find related papers by JEL classification:
R21 - Urban, Rural, and Regional Economics - - Household Analysis - - - Housing Demand
C39 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Other

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Anas, Alex, 1980. "A model of residential change and neighborhood tipping," Journal of Urban Economics, Elsevier, vol. 7(3), pages 358-370, May. [Downloadable!] (restricted)
  2. William A. Brock & Steven N. Durlauf, 2000. "Interactions-Based Models," Working Papers 00-05-028, Santa Fe Institute.
    Other versions:
  3. Spivack, Richard N, 1991. "The Determinants of Housing Maintenance and Upkeep: A Case Study of Providence, Rhode Island," Applied Economics, Taylor and Francis Journals, vol. 23(4A), pages 639-46, Part A, A.
  4. Glaeser, Edward L & Sacerdote, Bruce & Scheinkman, Jose A, 1996. "Crime and Social Interactions," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 507-48, May. [Downloadable!] (restricted)
    Other versions:
  5. Pollak, Robert A, 1976. "Interdependent Preferences," American Economic Review, American Economic Association, vol. 66(3), pages 309-20, June.
  6. Yannis Ioannides, 2001. "Neighborhood Income Distributions," Discussion Papers Series, Department of Economics, Tufts University 0103, Department of Economics, Tufts University. [Downloadable!]
    Other versions:
  7. Yannis Ioannides, 2006. "Empirics of Social Interactions," Discussion Papers Series, Department of Economics, Tufts University 0611, Department of Economics, Tufts University. [Downloadable!]
  8. Bénabou, Roland, 1993. "Heterogeneity, Stratification and Growth," CEPR Discussion Papers 815, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  9. Dennis Epple & Holger Sieg, 1999. "Estimating Equilibrium Models of Local Jurisdictions," Journal of Political Economy, University of Chicago Press, vol. 107(4), pages 645-681, August. [Downloadable!] (restricted)
  10. Coulson, N Edward & Bond, Eric W, 1990. "A Hedonic Approach to Residential Succession," The Review of Economics and Statistics, MIT Press, vol. 72(3), pages 433-44, August. [Downloadable!] (restricted)
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  11. Bond, Eric W. & Coulson, N. Edward, 1989. "Externalities, filtering, and neighborhood change," Journal of Urban Economics, Elsevier, vol. 26(2), pages 231-249, September. [Downloadable!] (restricted)
  12. Binder, M. & Pesaran, M. H., 1998. "Optimal Consumption Decisions under Social Interactions," Cambridge Working Papers in Economics 9805, Faculty of Economics, University of Cambridge.
  13. Katherine A. Kiel & Richard T. Carson, 1990. "An Examination of Systematic Differences in the Appreciation of Individual Housing Units," Journal of Real Estate Research, American Real Estate Society, vol. 5(3), pages 301-318. [Downloadable!]
  14. Sheppard, Stephen, 1999. "Hedonic analysis of housing markets," Handbook of Regional and Urban Economics, in: P. C. Cheshire & E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 3, chapter 41, pages 1595-1635 Elsevier. [Downloadable!] (restricted)
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  15. Strange, William, 1992. "Overlapping neighborhoods and housing externalities," Journal of Urban Economics, Elsevier, vol. 32(1), pages 17-39, July. [Downloadable!] (restricted)
  16. Schelling, Thomas C, 1969. "Models of Segregation," American Economic Review, American Economic Association, vol. 59(2), pages 488-93, May. [Downloadable!] (restricted)
  17. Case, Anne, 1992. "Neighborhood influence and technological change," Regional Science and Urban Economics, Elsevier, vol. 22(3), pages 491-508, September. [Downloadable!] (restricted)
  18. Yannis M. Ioannides, 1999. "Neighborhood Interactions in Local Communities and Intergenerational Transmission of Human Capital," Discussion Papers Series, Department of Economics, Tufts University 9911, Department of Economics, Tufts University. [Downloadable!]
  19. Ioannides, Yannis M., 2002. "Residential neighborhood effects," Regional Science and Urban Economics, Elsevier, vol. 32(2), pages 145-165, March. [Downloadable!] (restricted)
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  20. Gabriel, Stuart A. & Rosenthal, Stuart S., 1999. "Location and the effect of demographic traits on earnings," Regional Science and Urban Economics, Elsevier, vol. 29(4), pages 445-461, July. [Downloadable!] (restricted)
  21. repec:att:wimass:199127 is not listed on IDEAS
  22. Yannis M Ioannides & Jeffrey E Zabel, 2002. "Interactions, Neighborhood Selection, and Housing Demand," Working Papers 02-19, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
    Other versions:
  23. Hoyt, William H. & Rosenthal, Stuart S., 1997. "Household Location and Tiebout: Do Families Sort According to Preferences for Locational Amenities?," Journal of Urban Economics, Elsevier, vol. 42(2), pages 159-178, September. [Downloadable!] (restricted)
  24. Miyao, Takahiro, 1978. "Dynamic Instability of a Mixed City in the Presence of Neighborhood Externalities," American Economic Review, American Economic Association, vol. 68(3), pages 454-63, June. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Yannis M. Ioannides & Jeffrey E. Zabel, 2000. "Neighborhood Effects and Housing Demand," Discussion Papers Series, Department of Economics, Tufts University 0012, Department of Economics, Tufts University. [Downloadable!]
    Other versions:
  2. Drusilla K. Brown & Rajesh Chadha & Alan V. Deardorff & Robert M. Stern, 2001. "Computational Analysis of the Impact on India of the Uruguay Round and the Forthcoming WTO Trade Negotiations," Discussion Papers Series, Department of Economics, Tufts University 0107, Department of Economics, Tufts University. [Downloadable!]
    Other versions:
  3. Yannis Ioannides, 2001. "Neighborhood Income Distributions," Discussion Papers Series, Department of Economics, Tufts University 0103, Department of Economics, Tufts University. [Downloadable!]
    Other versions:
  4. George Norman & Lynne Pepall & Dan Richards, 2001. "Versioning, Brand-Stretching, and the Evolution of e-Commerce Markets," Discussion Papers Series, Department of Economics, Tufts University 0114, Department of Economics, Tufts University. [Downloadable!]
  5. Eric Maurin & Julie Moschion, 2006. "The social multiplier and labour market participation of mothers," Cahiers de la Maison des Sciences Economiques v06044, Université Panthéon-Sorbonne (Paris 1). [Downloadable!]
    Other versions:
  6. Yannis M. Ioannides, 1999. "Residential Neighborhood Effects," Discussion Papers Series, Department of Economics, Tufts University 9912, Department of Economics, Tufts University. [Downloadable!]
    Other versions:
  7. Dominique Goux & Eric Maurin, 2006. "Close Neighbours Matter: Neighbourhood Effects on Early Performance at School," IZA Discussion Papers 2095, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
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