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Theoretical and Empirical Considerations Regarding Space in Hedonic Housing Price Model Applications

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  • William M. Bowen

Abstract

Recent advances in spatial data analysis are making their way into a variety of applied research settings. Once purely the domain of specialists, increased availability of both spatial data and the software with which to handle them, spatial analysis techniques are diffusing into other areas of research. This article first details the rationale and need for spatial considerations in hedonic price models and focuses on the link between the context of the housing market and the statistical considerations necessary when dealing with spatial data. These issues are then explored via an application to the housing market of Cuyahoga County, Ohio. It was found, first, that explicit modeling of space is not always warranted. One of our two models shows no substantial signs of spatial misspecification. However, in the second model, where diagnostic tests call for the explicit modeling of space, some drastic differences were found between the space-neglected model and the more correctly specified spatial hedonic model. This highlights the need to include spatial diagnostics as part of the standard model-fitting procedure for hedonic house price applications. Copyright 2001 Gatton College of Business and Economics, University of Kentucky.

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  • William M. Bowen, 2001. "Theoretical and Empirical Considerations Regarding Space in Hedonic Housing Price Model Applications," Growth and Change, Wiley Blackwell, vol. 32(4), pages 466-490.
  • Handle: RePEc:bla:growch:v:32:y:2001:i:4:p:466-490
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    Cited by:

    1. Liu, Sezhu & Hite, Diane, 2013. "Measuring the Effect of Green Space on Property Value: An Application of the Hedonic Spatial Quantile Regression," 2013 Annual Meeting, February 2-5, 2013, Orlando, Florida 143045, Southern Agricultural Economics Association.
    2. Andreas Mense & Konstantin Kholodilin, 2014. "Noise expectations and house prices: the reaction of property prices to an airport expansion," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 52(3), pages 763-797, May.
    3. Jeffrey P. Cohen & Cletus C. Coughlin, 2008. "Spatial Hedonic Models Of Airport Noise, Proximity, And Housing Prices," Journal of Regional Science, Wiley Blackwell, vol. 48(5), pages 859-878.
    4. Christopher Bitter & Gordon Mulligan & Sandy Dall’erba, 2007. "Incorporating spatial variation in housing attribute prices: a comparison of geographically weighted regression and the spatial expansion method," Journal of Geographical Systems, Springer, vol. 9(1), pages 7-27, April.
    5. Khalid Haniza, 2015. "Spatial heterogeneity and spatial bias analyses in hedonic price models: some practical considerations," Bulletin of Geography. Socio-economic Series, De Gruyter Open, vol. 28(28), pages 113-128, June.
    6. Ottensmann, John R. & Payton, Seth & Man, Joyce, 2008. "Urban Location and Housing Prices within a Hedonic Model," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 38(1).
    7. Biljana Davidovska Stojanova & Branimir Jovanovic & Maja Kadievska Vojnovic & Gani Ramadani & Magdalena Petrovska, 2008. "Real Estate Prices In The Republic Of Macedonia," Working Papers 2008-03, National Bank of the Republic of Macedonia.
    8. Todd H. Kuethe, 2012. "Spatial Fragmentation and the Value of Residential Housing," Land Economics, University of Wisconsin Press, vol. 88(1), pages 16-27.
    9. Hansen, Winslow D. & Naughton, Helen T., 2013. "The effects of a spruce bark beetle outbreak and wildfires on property values in the wildland–urban interface of south-central Alaska, USA," Ecological Economics, Elsevier, vol. 96(C), pages 141-154.
    10. Bing Zhu & Roland Füss & Nico Rottke, 2011. "The Predictive Power of Anisotropic Spatial Correlation Modeling in Housing Prices," The Journal of Real Estate Finance and Economics, Springer, vol. 42(4), pages 542-565, May.
    11. William H. Rogers, 2006. "A Market for Institutions: Assessing the Impact of Restrictive Covenants on Housing," Land Economics, University of Wisconsin Press, vol. 82(4), pages 500-512.
    12. Steven Carter, 2008. "Court-ordered Busing and Housing Prices: The Case of Pasadena and San Marino," Journal of Real Estate Research, American Real Estate Society, vol. 30(3), pages 377-394.

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