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The effect of new residential construction on housing prices

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  • Zahirovich-Herbert, Velma
  • Gibler, Karen M.

Abstract

New construction is generally expected to create positive externalities. We use a hedonic model to estimate the premium paid for new houses as well as the influence of new residential construction on the selling prices of existing houses considering the number and relative size of the newly constructed houses in the area. The results indicate even atypically large new houses command a premium. Construction of houses of average size relative to the reference group has little effect on existing house prices except to create some competition for houses that were achieving relatively high prices considering their attributes. Meanwhile, construction of a concentration of larger than average size houses exerts a small positive effect on existing house prices, especially for those houses that are selling for a relatively low price. The effect is the strongest when the new construction is located within one-quarter mile.

Suggested Citation

  • Zahirovich-Herbert, Velma & Gibler, Karen M., 2014. "The effect of new residential construction on housing prices," Journal of Housing Economics, Elsevier, vol. 26(C), pages 1-18.
    • Handle: RePEc:eee:jhouse:v:26:y:2014:i:c:p:1-18
    DOI: 10.1016/j.jhe.2014.06.003
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    More about this item

    Keywords

    House prices; New construction; Quantile regression;
    All these keywords.

    JEL classification:

    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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