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A Spatial Approach to Price Segmentation in Housing Markets

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  • Gregory J. Costello

Abstract

This paper uses a large transaction data set from the city of Perth Western Australia to test empirically whether differentials exist in the patterns of information diffusion that operate for different price segments in housing markets. Whereas some previous studies have tested the influence of price segmentation within aggregate city-wide housing markets, these studies are limited in that they do not acknowledge the influence of important spatial sub-markets. More specifically if the aggregate city-wide housing market is segmented according to price then it is not clear whether observed differentials in price changes between price segments are due to specific price segment influences or specific spatial influences. This study employs Tukeyís honestly significance difference test to identify homogenous spatial price segments. The spatial groups are identified according to postal code district and individual real house price indices are constructed for individual spatial regions and larger homogenous groups. The indices are used in serial correlation tests. Initially price changes in homogenous price segments are regressed on lagged price changes for similar price segments in neighbouring spatial regions. These tests are also performed for a control group of homogenous price segments in non-neighbouring spatial regions. It is hoped that this methodology might establish whether price segment specific or location specific factors influence information diffusion processes within the housing market more heavily. Preliminary results indicate that information from past price changes appear to be more persistent in the cheaper price segments.

Suggested Citation

  • Gregory J. Costello, 2001. "A Spatial Approach to Price Segmentation in Housing Markets," ERES eres2001_139, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2001_139
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    References listed on IDEAS

    as
    1. John M. Clapp & Walter Dolde & Dogan Tirtiroglu, 1995. "Imperfect Information and Investor Inferences From Housing Price Dynamics," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 23(3), pages 239-269, September.
    2. Hansen, Lars Peter & Hodrick, Robert J, 1980. "Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An Econometric Analysis," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 829-853, October.
    3. Walter Dolde & Dogan Tirtiroglu, 1997. "Temporal and Spatial Information Diffusion in Real Estate Price Changes and Variances," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 25(4), pages 539-565, December.
    4. Goodman, John L, Jr, 1998. "Aggregation of Local Housing Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 16(1), pages 43-53, January.
    5. Daniel C. Quan & John M. Quigley, 1989. "Inferring an Investment Return Series for Real Estate from Observations on Sales," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(2), pages 218-230, June.
    6. Case, Karl E & Shiller, Robert J, 1989. "The Efficiency of the Market for Single-Family Homes," American Economic Review, American Economic Association, vol. 79(1), pages 125-137, March.
    7. Summers, Lawrence H, 1986. "Does the Stock Market Rationally Reflect Fundamental Values?," Journal of Finance, American Finance Association, vol. 41(3), pages 591-601, July.
    8. Gregory J. Costello, 2000. "Pricing size effects in housing markets," Journal of Property Research, Taylor & Francis Journals, vol. 17(3), pages 203-219, January.
    9. Karl E. Case & Robert J. Shiller, 1990. "Forecasting Prices and Excess Returns in the Housing Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 18(3), pages 253-273, September.
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    Cited by:

    1. Keemin Sohn, 2013. "Feature Mapping the Seoul Metro Station Areas Based on a Self-Organizing Map," Journal of Urban Technology, Taylor & Francis Journals, vol. 20(4), pages 23-42, October.

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    More about this item

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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