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Hedonic analysis with locally weighted regression: An application to the shadow cost of housing regulation in Southern California

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  • Sunding, David L.
  • Swoboda, Aaron M.

Abstract

This paper investigates the role of hedonic model misspecification through inappropriate geographic aggregation in the debate over the effects of housing regulation. We use locally weighted regression (LWR) techniques and geo-referenced data to allow the housing hedonic parameters to vary over space. This modeling strategy better represents micro-market realities and the importance of location as a prime determinant of housing prices. Our results, based on a unique dataset of almost 14,000 single-family home sales between 1993 and 2001 in Southern California, suggest regulation had strong direct impacts on the housing market as suggested by Glaeser and Gyourko (2003) and Cheung et al. (2009a) and not indirectly through increased land scarcity as suggested by Davis and Palumbo (2007).

Suggested Citation

  • Sunding, David L. & Swoboda, Aaron M., 2010. "Hedonic analysis with locally weighted regression: An application to the shadow cost of housing regulation in Southern California," Regional Science and Urban Economics, Elsevier, vol. 40(6), pages 550-573, November.
    • Handle: RePEc:eee:regeco:v:40:y:2010:i:6:p:550-573
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    References listed on IDEAS

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    1. Daniel P. McMillen & Christian L. Redfearn, 2010. "Estimation And Hypothesis Testing For Nonparametric Hedonic House Price Functions," Journal of Regional Science, Wiley Blackwell, vol. 50(3), pages 712-733, August.
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    5. Ron Cheung & Keith Ihlanfeldt & Tom Mayock, 2009. "The Incidence of the Land Use Regulatory Tax," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 37(4), pages 675-704, December.
    6. McMillen, Daniel P., 1996. "One Hundred Fifty Years of Land Values in Chicago: A Nonparametric Approach," Journal of Urban Economics, Elsevier, vol. 40(1), pages 100-124, July.
    7. Harrison, David Jr. & Rubinfeld, Daniel L., 1978. "Hedonic housing prices and the demand for clean air," Journal of Environmental Economics and Management, Elsevier, vol. 5(1), pages 81-102, March.
    8. Elena G. Irwin, 2002. "The Effects of Open Space on Residential Property Values," Land Economics, University of Wisconsin Press, vol. 78(4), pages 465-480.
    9. John M. Quigley & Steven Raphael & Larry A. Rosenthal, 2004. "Local Land-use Controls and Demographic Outcomes in a Booming Economy," Urban Studies, Urban Studies Journal Limited, vol. 41(2), pages 389-421, February.
    10. Redfearn, Christian L., 2009. "How informative are average effects? Hedonic regression and amenity capitalization in complex urban housing markets," Regional Science and Urban Economics, Elsevier, vol. 39(3), pages 297-306, May.
    11. Anderson, Soren T. & West, Sarah E., 2006. "Open space, residential property values, and spatial context," Regional Science and Urban Economics, Elsevier, vol. 36(6), pages 773-789, November.
    12. Cheung, Ron & Ihlanfeldt, Keith & Mayock, Thomas, 2009. "The regulatory tax and house price appreciation in Florida," Journal of Housing Economics, Elsevier, vol. 18(1), pages 34-48, March.
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    Citations

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    Cited by:

    1. Céline Grislain-Letrémy & Arthur Katossky, 2014. "The Impact of Hazardous Industrial Facilities on Housing Prices : A Comparison of Parametric and Semiparametric Hedonic Price Models," Working Papers 2014-13, Center for Research in Economics and Statistics.
    2. David Christafore & Susane Leguizamon, 2015. "Spatial Spillovers of Land Use Regulation in the United States," Housing Studies, Taylor & Francis Journals, vol. 30(3), pages 491-503, June.
    3. Ross Kendall & Peter Tulip, 2018. "The Effect of Zoning on Housing Prices," RBA Research Discussion Papers rdp2018-03, Reserve Bank of Australia.
    4. Francis Ostermeijer & Hans Koster & Jos van Ommeren, "undated". "Residential parking costs and car ownership: Implications for parking policy and automated vehicles," Tinbergen Institute Discussion Papers 19-020/VIII, Tinbergen Institute.
    5. Koster, Hans R.A. & Rouwendal, Jan, 2013. "Agglomeration, commuting costs, and the internal structure of cities," Regional Science and Urban Economics, Elsevier, vol. 43(2), pages 352-366.
    6. Baron, Aneil & Zhang, Wendong & Irwin, Elena, 2016. "Estimating the Capitalization Effects of Harmful Algal Bloom Incidence, Intensity and Duration? A Repeated Sales Model of Lake Erie Lakefront Property Values," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236589, Agricultural and Applied Economics Association.
    7. repec:bla:presci:v:96:y:2017:i:2:p:423-444 is not listed on IDEAS
    8. Simlai, Prodosh, 2014. "Estimation of variance of housing prices using spatial conditional heteroskedasticity (SARCH) model with an application to Boston housing price data," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(1), pages 17-30.
    9. repec:gam:jsusta:v:11:y:2019:i:2:p:412-:d:197750 is not listed on IDEAS
    10. C. Grislain-Letrémy & A. Katossky, 2014. "The Impact of Hazardous Industrial Facilities on Housing Prices: A Comparison of Parametric and Semiparametric Hedonic Price Models," Documents de Travail de l'Insee - INSEE Working Papers g2014-05, Institut National de la Statistique et des Etudes Economiques.
    11. repec:taf:japsta:v:44:y:2017:i:11:p:1979-1999 is not listed on IDEAS
    12. Grislain-Letrémy, Céline & Katossky, Arthur, 2014. "The impact of hazardous industrial facilities on housing prices: A comparison of parametric and semiparametric hedonic price models," Regional Science and Urban Economics, Elsevier, vol. 49(C), pages 93-107.
    13. repec:eee:regeco:v:77:y:2019:i:c:p:276-288 is not listed on IDEAS
    14. Liao, Wen-Chi & Wang, Xizhu, 2012. "Hedonic house prices and spatial quantile regression," Journal of Housing Economics, Elsevier, vol. 21(1), pages 16-27.
    15. Aaron Swoboda & Tsegaye Nega & Maxwell Timm, 2015. "Hedonic Analysis Over Time And Space: The Case Of House Prices And Traffic Noise," Journal of Regional Science, Wiley Blackwell, vol. 55(4), pages 644-670, September.
    16. repec:eee:regeco:v:75:y:2019:i:c:p:22-34 is not listed on IDEAS
    17. David Sunding, 2014. "Conserving Endangered Species through Regulation of Urban Development: The Case of California Vernal Pools," Land Economics, University of Wisconsin Press, vol. 90(2), pages 290-305.
    18. Alan T. K. Wan & Shangyu Xie & Yong Zhou, 2017. "A varying coefficient approach to estimating hedonic housing price functions and their quantiles," Journal of Applied Statistics, Taylor & Francis Journals, vol. 44(11), pages 1979-1999, August.

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