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Interactive property valuations

  • Ioannides, Yannis M.

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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Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 53 (2003)
Issue (Month): 1 (January)
Pages: 145-170

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Handle: RePEc:eee:juecon:v:53:y:2003:i:1:p:145-170
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622905

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  1. Yannis Ioannides, 2001. "Neighborhood Income Distributions," Discussion Papers Series, Department of Economics, Tufts University 0103, Department of Economics, Tufts University.
  2. Ioannides, Yannis M., 2002. "Residential neighborhood effects," Regional Science and Urban Economics, Elsevier, vol. 32(2), pages 145-165, March.
  3. 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.
  4. Brock, William A. & Durlauf, Steven N., 2001. "Interactions-based models," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 54, pages 3297-3380 Elsevier.
  5. 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.
  6. Binder, M. & Pesaran, M. H., 1998. "Optimal Consumption Decisions under Social Interactions," Cambridge Working Papers in Economics 9805, Faculty of Economics, University of Cambridge.
  7. 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.
  8. 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.
  9. Yannis Ioannides, 2006. "Empirics of Social Interactions," Discussion Papers Series, Department of Economics, Tufts University 0611, Department of Economics, Tufts University.
  10. Pollak, Robert A, 1976. "Interdependent Preferences," American Economic Review, American Economic Association, vol. 66(3), pages 309-20, June.
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  12. Alex Anas, 1978. "A Model of Residential Change and Neighborhood Tipping," Working Papers 305, Queen's University, Department of Economics.
  13. Stephen Sheppard, 1998. "Hedonic Analysis of Housing Markets," Urban/Regional 9805001, EconWPA.
  14. Strange, William, 1992. "Overlapping neighborhoods and housing externalities," Journal of Urban Economics, Elsevier, vol. 32(1), pages 17-39, July.
  15. Benabou, R., 1992. "Heterogeneity, Stratification, and Growth," Working papers 93-4, Massachusetts Institute of Technology (MIT), Department of Economics.
  16. Case, Anne, 1992. "Neighborhood influence and technological change," Regional Science and Urban Economics, Elsevier, vol. 22(3), pages 491-508, September.
  17. Schelling, Thomas C, 1969. "Models of Segregation," American Economic Review, American Economic Association, vol. 59(2), pages 488-93, May.
  18. Manski, C.F., 1991. "Identification of Endogenous Social Effects: the Reflection Problem," Working papers 9127, Wisconsin Madison - Social Systems.
  19. Anna Hardman & Yannis Ioannides, 2004. "Income Mixing and Housing in U.S. Cities: Evidence from Neighborhood Clusters of the American Housing Survey," Discussion Papers Series, Department of Economics, Tufts University 0420, Department of Economics, Tufts University.
  20. Bond, E.W. & Coulson, N.E., 1988. "A Hedonic Approach To Residential Succession," Papers 2-88-1, Pennsylvania State - Department of Economics.
  21. 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.
  22. 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.
  23. 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.
  24. Bond, Eric W. & Coulson, N. Edward, 1989. "Externalities, filtering, and neighborhood change," Journal of Urban Economics, Elsevier, vol. 26(2), pages 231-249, September.
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