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The Predictive Performance of Multilevel Models of Housing Sub-markets: A Comparative Analysis

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  • Chris Leishman
  • Greg Costello
  • Steven Rowley
  • Craig Watkins

Abstract

Much of the housing sub-market literature has focused on establishing methods that allow the partitioning of data into distinct market segments. This paper seeks to move the focus on to the question of how best to model sub-markets once they have been identified. It focuses on evaluating the effectiveness of multilevel models as a technique for modelling sub-markets. The paper uses data on housing transactions from Perth, Western Australia, to develop and compare three competing sub-market modelling strategies. Model 1 consists of a city-wide ‘benchmark’; model 2 provides a series of sub-market-specific hedonic estimates (this is the ‘industry standard’) and models 3 and 4 provide two variants on the multilevel model (differentiated by variation in the degrees of spatial granularity embedded in the model structure). The results suggest that the more granular multilevel specification enhances empirical performance and reduces the incidence of non-random spatial errors.

Suggested Citation

  • Chris Leishman & Greg Costello & Steven Rowley & Craig Watkins, 2013. "The Predictive Performance of Multilevel Models of Housing Sub-markets: A Comparative Analysis," Urban Studies, Urban Studies Journal Limited, vol. 50(6), pages 1201-1220, May.
    • Handle: RePEc:sae:urbstu:v:50:y:2013:i:6:p:1201-1220
    DOI: 10.1177/0042098012466603
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    References listed on IDEAS

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    7. Melanie Zhang & Steven Devaney & Anupam Nanda, 2018. "Strategic Alliance and Submarket Choices of Commercial Real Estate Investors – A Multinomial Approach," ERES eres2018_210, European Real Estate Society (ERES).
    8. Kopczewska, Katarzyna & Ćwiakowski, Piotr, 2021. "Spatio-temporal stability of housing submarkets. Tracking spatial location of clusters of geographically weighted regression estimates of price determinants," Land Use Policy, Elsevier, vol. 103(C).
    9. Steven Devaney & David Scofield & Fangchen Zhang, 2019. "Only the Best? Exploring Cross-Border Investor Preferences in US Gateway Cities," The Journal of Real Estate Finance and Economics, Springer, vol. 59(3), pages 490-513, October.

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