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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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Listed author(s):
  • 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).

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File URL: http://www.sciencedirect.com/science/article/pii/S0166-0462(10)00060-8
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Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 40 (2010)
Issue (Month): 6 (November)
Pages: 550-573

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Handle: RePEc:eee:regeco:v:40:y:2010:i:6:p:550-573
Contact details of provider: Web page: http://www.elsevier.com/locate/regec

Keywords: Hedonic analysis Housing regulation Land price Locally weighted regression Geographically weighted regression Geo-referenced data Semi-parametric econometrics;

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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.
  2. David M. Brasington, 1999. "Which Measures of School Quality Does the Housing Market Value?," Journal of Real Estate Research, American Real Estate Society, vol. 18(3), pages 395-414.
  3. Stuart S. Rosenthal, 1999. "Residential Buildings And The Cost Of Construction: New Evidence On The Efficiency Of The Housing Market," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 288-302, May.
  4. Andrey D. Pavlov, 2000. "Space-Varying Regression Coefficients: A Semi-parametric Approach Applied to Real Estate Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 28(2), pages 249-283.
  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.
  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.
  13. Beckmann, Martin J., 1969. "On the distribution of urban rent and residential density," Journal of Economic Theory, Elsevier, vol. 1(1), pages 60-67, June.
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Cited by:

  1. 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 la DESE - Working Papers of the DESE g2014-05, Institut National de la Statistique et des Etudes Economiques, DESE.
  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. 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.
  4. 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, 2016, Boston, Massachusetts 236589, Agricultural and Applied Economics Association.
  5. 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.
  6. 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.
  7. Liao, Wen-Chi & Wang, Xizhu, 2012. "Hedonic house prices and spatial quantile regression," Journal of Housing Economics, Elsevier, vol. 21(1), pages 16-27.
  8. 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.

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