Spatial Dependence, Housing Submarkets, and House Prices
This paper compares the impacts of alternative models of spatial dependence on the accuracy of house price predictions in a mass appraisal context. Explicit modeling of spatial dependence is characterized as a more fluid approach to defining housing submarkets. This approach allows the relevant “submarket” to vary from house to house and for transactions involving other dwellings in each submarket to have varying impacts depending on distance. We compare the predictive ability of different specifications of both geostatistical and lattice models as well as a simpler model based on submarkets with fixed boundaries. We conclude that – for our data – no spatial statistics method does as well in terms of predictive ability as a simple OLS model that includes a series of dummy variables defining submarkets. However, of the spatial statistics methods, geostatistical models provide more accurate predictions than lattice models. We argue that this is due to the fact that the kriging procedure used to make predictions in a geostatistical framework directly incorporates spatial information about nearby properties. That is not possible in a lattice framework due to the reliance on a matrix of weights that incorporates relationships only for the sample of properties that transact.
|Date of creation:||Jun 2005|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 41 22 / 312 09 61
Fax: 41 22 / 312 10 26
Web page: http://www.swissfinanceinstitute.ch
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dubin, Robin A, 1998. "Predicting House Prices Using Multiple Listings Data," The Journal of Real Estate Finance and Economics, Springer, vol. 17(1), pages 35-59, July.
- Pace, R Kelley & Gilley, Otis W, 1997. "Using the Spatial Configuration of the Data to Improve Estimation," The Journal of Real Estate Finance and Economics, Springer, vol. 14(3), pages 333-40, May.
- Clapp, John M & Rodriguez, Mauricio, 1999. "Erratum: Spatiotemporal Autoregressive Models of Neighborhood Effects," The Journal of Real Estate Finance and Economics, Springer, vol. 19(1), pages 85, July.
- Clapp, John M, 2003. "A Semiparametric Method for Valuing Residential Locations: Application to Automated Valuation," The Journal of Real Estate Finance and Economics, Springer, vol. 27(3), pages 303-20, November.
- Pace, R Kelley & Barry, Ronald & Sirmans, C F, 1998.
"Spatial Statistics and Real Estate,"
The Journal of Real Estate Finance and Economics,
Springer, vol. 17(1), pages 5-13, July.
- Can, Ayse, 1992. "Specification and estimation of hedonic housing price models," Regional Science and Urban Economics, Elsevier, vol. 22(3), pages 453-474, September.
- Dubin, Robin A, 1988. "Estimation of Regression Coefficients in the Presence of Spatially Autocorrelated Error Terms," The Review of Economics and Statistics, MIT Press, vol. 70(3), pages 466-74, August.
- L. Randall Wray & Stephanie Bell, 2004. "Introduction," Chapters, in: Credit and State Theories of Money, chapter 1 Edward Elgar.
- Timothy J. Fik & David C. Ling & Gordon F. Mulligan, 2003. "Modeling Spatial Variation in Housing Prices: A Variable Interaction Approach," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 31(4), pages 623-646, December.
- Colwell, Peter F, 1998. "A Primer on Piecewise Parabolic Multiple Regression Analysis via Estimations of Chicago CBD Land Prices," The Journal of Real Estate Finance and Economics, Springer, vol. 17(1), pages 87-97, July.
- Basu, Sabyasachi & Thibodeau, Thomas G, 1998. "Analysis of Spatial Autocorrelation in House Prices," The Journal of Real Estate Finance and Economics, Springer, vol. 17(1), pages 61-85, July.
- Bradford Case & John Clapp & Robin Dubin & Mauricio Rodriguez, 2004. "Modeling Spatial and Temporal House Price Patterns: A Comparison of Four Models," The Journal of Real Estate Finance and Economics, Springer, vol. 29(2), pages 167-191, 09.
- Bourassa, Steven C. & Hamelink, Foort & Hoesli, Martin & MacGregor, Bryan D., 1999. "Defining Housing Submarkets," Journal of Housing Economics, Elsevier, vol. 8(2), pages 160-183, June.
- Can, Ayse & Megbolugbe, Isaac, 1997. "Spatial Dependence and House Price Index Construction," The Journal of Real Estate Finance and Economics, Springer, vol. 14(1-2), pages 203-22, Jan.-Marc.
- A. F. Militino & M. D. Ugarte & L. García-Reinaldos, 2004. "Alternative Models for Describing Spatial Dependence among Dwelling Selling Prices," The Journal of Real Estate Finance and Economics, Springer, vol. 29(2), pages 193-209, 09.
When requesting a correction, please mention this item's handle: RePEc:fam:rpseri:rp151. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marilyn Barja)
If references are entirely missing, you can add them using this form.