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A Neural Network Analysis of the Effect of Age on Housing Values

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Abstract

Empirical studies using multiple regression find the value of a residential property declines with its age. Because these results confirm the fact of physical deterioration of a house over time, little attention is paid to the statistical technique's inherent shortcomings. Accordingly, this paper uses a neural network, which is able to overcome multiple regression's methodological problems, to re-examine the effect of age on a house's value. We find that a negative relationship of value to age holds only for the first sixteen to twenty years of the life of a house. Then, not only does the decline in value stop, but a house actually starts to experience appreciation related, in part, to its lot size.

Suggested Citation

  • A. Quang Do & G. Grudnitski, 1993. "A Neural Network Analysis of the Effect of Age on Housing Values," Journal of Real Estate Research, American Real Estate Society, vol. 8(2), pages 253-264.
  • Handle: RePEc:jre:issued:v:8:n:2:1993:p:253-264
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    Cited by:

    1. Plakandaras, Vasilios & Gupta, Rangan & Gogas, Periklis & Papadimitriou, Theophilos, 2015. "Forecasting the U.S. real house price index," Economic Modelling, Elsevier, vol. 45(C), pages 259-267.
    2. Nghiep Nguyen & Al Cripps, 2001. "Predicting Housing Value: A Comparison of Multiple Regression Analysis and Artificial Neural Networks," Journal of Real Estate Research, American Real Estate Society, vol. 22(3), pages 313-336.
    3. R. Kelley Pace, 1998. "Appraisal Using Generalized Additive Models," Journal of Real Estate Research, American Real Estate Society, vol. 15(1), pages 77-100.
    4. Steven Peterson & Albert B. Flanagan, 2009. "Neural Network Hedonic Pricing Models in Mass Real Estate Appraisal," Journal of Real Estate Research, American Real Estate Society, vol. 31(2), pages 147-164.
    5. repec:ipg:wpaper:2014-473 is not listed on IDEAS
    6. repec:kap:enreec:v:69:y:2018:i:2:d:10.1007_s10640-016-0076-5 is not listed on IDEAS
    7. Manuel Landajo & Celia Bilbao & Amelia Bilbao, 2012. "Nonparametric neural network modeling of hedonic prices in the housing market," Empirical Economics, Springer, vol. 42(3), pages 987-1009, June.

    More about this item

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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