The heterogeneous impact of house purchase limits policy on housing prices: Comparison between elite and non-elite school district houses

The effectiveness of housing purchase limits policies has aroused heated debate, yet few discussed its impact on educational capitalization. We examine the heterogeneous effect of housing purchase limits policy on the price of elite school district houses (ESDH) and non-elite school district houses. By exploiting second-hand houses data in Hefei China, we find that the price of ESDH has increased greatly after the limitation, compared with non-elite school districts. Further we discover that the ESDH have lower depreciation risks, and their price is higher in neighborhoods with smaller dwelling area. Our finding indicates that the limits policy may have exacerbated the educational capitalization.     

The Influence of Reference Group House Size on House Price

This article examines the effect of a change in housing consumption of various reference groups on predicted own house price. I employ a spatial autoregressive model and find that an increase in average house size of the eight nearest neighbors and the largest houses in the district has a negative effect on predicted house price, whereas the effect of an increase in average house size of the further neighbors (9th through 16th neighbors) and the smallest houses in the district on predicted house price is positive. This suggests that the “envy effect” dominates with respect to the nearest and largest neighbors, whereas the “basking in the reflected glory” effect dominates with respect to the further smallest neighbors.     

Flooding and Liquidity on the Bayou: The Capitalization of Flood Risk into House Value and Ease‐of‐Sale

The existing literature focuses on how perceived flood risk affects house value. Search theory, however, implies that flood risks will be capitalized into both house price and liquidity. This article draws on search theory to develop an empirical approach for estimating flood risk capitalization into both price and selling time. The results show the mix of price and liquidity capitalization varies by level of flood risk as well as across housing market phases. Regardless of the specific capitalization pattern, the results illustrate that focusing solely on price without allowing for concomitant liquidity capitalization can yield estimates that understate the full impact of flood risk on house transactions.     

The Accuracy of Owner-Provided House Values: The 1978–1991 American Housing Survey

The American Housing Survey (AHS) includes the owner's valuation of the house as a measure of the house's value. If owner-stated values are accurate, the AHS (as well as other survey instruments) can be used by researchers studying a variety of topics. In this study we use the metropolitan version of the AHS for three cities over fourteen years to compare owners' valuations with sales prices of houses that sold in the twelve months prior to an interview. We find that, on average, recent buyers report house values that are 8.4% higher than the stated sales prices. Further analysis indicates that these recent buyers, when compared with owners with longer tenure, overvalue their houses by 3.3%, on average. Thus, we find that the average owner overvalues his house by 5.1%. Also, differences between sales prices and owners' valuations are not related to particular characteristics of the house, occupants (other than length of tenure), or neighborhood. Thus, the use of the owners' valuations will result in accurate estimates of house price indexes and will provide reliable estimates of the prices of house and neighborhood characteristics.     

The Economic Implications of House Price Capitalization: A Synthesis

In this article, I synthesize an emerging literature that explores the conditions under which public and private investments and intergovernmental transfers are capitalized into local house prices and the broader economic implications of such capitalization. The main insights are: (1) house price capitalization is more pronounced in locations with strict regulatory and geographical supply constraints; (2) capitalization can induce the provision of durable local public goods and club goods; and (3) capitalization effects—which are habitually ignored by policy‐makers—have important adverse consequences for a wide range of policies such as intergovernmental aid and the mortgage interest deduction.     

Do Conspicuous Consumers Pay Higher Housing Premiums? Spatial and Temporal Variation in the United States

This study is the first to examine the relationship between conspicuous demand and housing price dynamics. We hypothesize that conspicuous consumers would want high‐end homes to signal their wealth and this housing consumption behavior would induce greater deviations from fundamental house prices. We test this by using a unique dataset that matches the consumers’ appetite for nonhousing luxury goods from Google Insights for Search to housing premiums that they pay for high‐end houses in U.S. Metropolitan Statistical Areas (MSAs) during 2004–2011. The estimation results demonstrate that controlling for a wide range of MSA demographic and economic characteristics, conspicuous demand has a significant, positive relationship with housing premiums. This relationship varies spatially and temporally. Conspicuous demand has a stronger relationship with a price increase in high‐end homes in MSAs with a steady, higher housing premium than in MSAs with a volatile, lower premium during the boom period. In MSAs with a steady, higher housing premium, the relationship remains significant even during the bust period, potentially contributing to maintaining higher housing premiums.     

On the Nature of Self‐Assessed House Prices

In models of optimal household behavior, the value of housing affects consumption, savings and other variables. But homeowners do not know the value of their house for certain until they sell, so while they live in their home they must rely on local house price data to estimate its value. This article uses data from the recent housing boom and bust to demonstrate that changes in households' self‐assessed home values are strongly consistent with the predictions of a model in which households optimally filter available house price data. Specifically, we show that self‐assessed house prices did not increase as rapidly as house price indexes during the boom and did not decline as severely during the bust. A Kalman filter model nearly perfectly replicates these data. These findings have direct implications for economists studying asking prices during booms and busts, optimal default decisions and other key housing‐related phenomena.     

House Price Changes and Idiosyncratic Risk: The Impact of Property Characteristics

Although the average change in house prices is related to changes in fundamentals or perhaps market-wide bubbles, not all houses in a market appreciate at the same rate. The primary focus of our study is to investigate the reasons for these variations in price changes among houses within a market. We draw on three theories for guidance, one related to the optimal search strategy for sellers of atypical dwellings, another focusing on the bargaining process between a seller and potential buyers and the third relying on the concept of land leverage. We hypothesize that houses will appreciate at different rates depending on the characteristics of the property and the change in the strength of the housing market. These hypotheses are supported using data from three New Zealand housing markets.     

Deed Types, House Prices and Mortgage Interest Rates

When houses are sold they come with a deed attached that spells out the legal guarantees on good title. Some deeds give clues about the characteristics of the seller or the house. Using a 37,043-observation house price hedonic with a Bayesian spatial error model, we find the type of deed attached to a housing sale can have a dramatic correlation with the sale price. Ten deed types command a discount, and one commands a premium relative to warranty deeds. Mortgage rates for sheriff's deeds and foreclosure deeds are lower than for warranty deeds, indicating more sophisticated buyers.     

The Measurement and Determinants of Single-Family House Prices

We assess the conceptual and empirical features of a number of house price series for the United States. We then calculate a measure of the net up-grading of the existing stock of houses that took place during the 1950–1989 period and adjust price indexes for this net increase in quality. Judgments about the trend, volatility, and determinants of house prices are shown to depend crucially on which price series is used. The Freddie Mac upgrade-adjusted house price measure rose 5.7% over the past four decades, falling 7.7% from 1950 through 1970 before rising 14.5% from 1970 through 1989. Real house prices declined in the early 1980s due to the increase in real after-tax interest rates and the decline in real materials costs. The recovery of house prices in the late 1980s is attributed to lower unemployment and real after-tax interest rates and particularly to demographic factors associated with the aging of baby boomers.     

A Spatiotemporal Solution for the Simultaneous Sale Price and Time‐on‐the‐Market Problem

There exists an important methodological challenge when dealing with sale price and time‐on‐the‐market variables because both variables are simultaneously determined and related to the motivation of the sellers and buyers. Exploiting the fact that transactions occur over space and time, we propose a two‐stage approach based on instrumental variables (IV) built from information collected from previous transactions. The unidirectional temporal property and the fact that other transactions are exogenous from the perspective of a single buyer or seller are exploited to evaluate the effect of the sale price on time‐on‐the‐market, and the effect of time‐on‐the‐market on the sale price. Based on 29,471 transactions occurring in the suburban neighborhood of Montréal (1992‐2000), the results suggest that, everything else being equal, houses staying longer on the market provide negative information to the market, which results in a lower final sale price, while the final sale price is negatively related to time‐on‐the‐market, indicating that houses of better quality (better amenities) stay less time on the market.     

Predicting Spatial Patterns of House Prices Using LPR and Bayesian Smoothing

This article is motivated by the limited ability of standard hedonic price equations to deal with spatial variation in house prices. Spatial patterns of house prices can be viewed as the sum of many causal factors: Access to the central business district is associated with a house price gradient; access to decentralized employment subcenters causes more localized changes in house prices; in addition, neighborhood amenities (and disamenities) can cause house prices to change rapidly over relatively short distances. Spatial prediction (e.g., for an automated valuation system) requires models that can deal with all of these sources of spatial variation. We propose to accommodate these factors using a standard hedonic framework but incoporating a semiparametric model with structure in the residuals modeled with a partially Bayesian approach. The Bayesian framework enables us to provide complete inference in the form of a posterior distribution for each model parameter. Our model allows prediction at sampled or unsampled locations as well as prediction interval estimates. The nonparametric part of our model allows sufficient flexibility to find substantial spatial variation in house values. The parameters of the kriging model provide further insights into spatial patterns. Out–of–sample mean squared error and related statistics validate the proposed methods and justify their use for spatial prediction of house values.     

Evidence of the Dual Nature of Property Value Recovery Following Environmental Remediation

The literature on home value diminution attributable to environmental degradation and its possible reversal typically ignores indirect effects upon neighborhood characteristics that can exacerbate the overall change in property values, resulting in underestimates of diminution and overestimates of recovery. Furthermore, to the extent that direct price effects and neighborhood transition effects respond differently to remediation efforts, the relatively new postremediation literature misses an important part of the recovery process. This study examines both direct and indirect effects and finds in the case of Houston Environmental Protection Agency Superfund sites that, while the direct value impacts of proximity to toxic waste sites was significantly reduced after remediation, the indirect effects associated with induced demographic changes were much slower to reverse, producing a housing market inertia that stifled full home value recovery.     

PRICE DISCRIMINATION IN STACKELBERG COMPETITION*

We examine the effects of price discrimination in the Stackelberg competition model for the linear demand case. We show that the leader does not use any price discrimination at all. Rather, the follower does all price discrimination. The leader directs all of its first mover preemptive advantage to attract the highest value consumers who pay a uniformly high price. We observe that profits and total welfare are larger and consumer surplus is smaller than those of the standard Stackelberg competition model.     

The cross-price effect on willingness-to-pay estimates in open-ended contingent valuation

Previous literature has shown that potential buyers use a reference price or product to form their opinion about the value of a new product. Therefore, the pricing decision is an interactive process. We investigate the two generalizations of the cross-price effect (the neighborhood price effect and the asymmetric price effect) on consumer willingness-to-pay (WTP) for multiple similar products in an open-ended contingent valuation context. Results show that the cross-price effect on WTP is prominent, with the neighborhood price effect holding in contingent valuation. No conclusions are reached about the asymmetric price effect.     

The Impact on Housing Values of Restrictions on Rights of Ownership: The Case of an Occupant's Age

With the exception of anecdotal information, little is known about the specific effects on the value of a house because its ownership is restricted to people older than a certain age. This article provides an empirically-derived assessment of the impact on the selling price of single-family residences when their ownership is age restricted. To determine the effect on the sales price of age-restricted houses, a standard hedonic pricing model is applied to a sample of 371 sales transactions drawn from a suburban area of a large city. The results indicate that an age restriction placed on houses decreases their value by 6%. This finding may be of interest to local land-use regulators, developers who are considering developing age-restricted houses and appraisers who wish to make value adjustments to these homes.     

Local House Price Diffusion

We contribute to the literature on house price diffusion by carrying out our analysis at three levels: CBSA (nationwide), town and census tract (Greater Boston Area). We estimate fixed‐effect models of house price growth on lagged growth (“Persistence”), nearby lagged growth (“Spillovers”) and Fundamentals growth. CBSA‐level Persistence and Spillover Effects are positive and significant. These large ripple/contagion effects likely contributed to the recent national‐level housing downturn. We find evidence of smaller town‐level Persistence and Spillover Effects. Hence, diffusion appears stronger across than within housing markets. Fundamentals and price expectations drive price diffusion, leaving room for bubbles from future price overoptimism.     

Longer term housing market effects of a major US airport closure

Using a unique dataset, we examine various effects of closing Denver's Stapleton Airport, and subsequent redevelopment, on nearby housing markets. We find immediate anticipatory price effects upon announcement, but no price changes at closing and little evidence of upward trending prices between announcement and closing. Post-closure, more higher income and fewer Black households moved in, and developers built larger houses on larger lots. Increases in the price of pre-existing housing are also found. Finally, we find that post-closing price increases were largest in areas that were closest to the center of new commercial development and that had greater exposure to new housing construction.     

House Search Duration in Hot and Cold Residential Markets

This study analyzes the determinants of house search duration of consumption‐driven buyers and individual investors in different housing market environments. We use data from surveys of recent house‐buyers in “hot” and “cold” housing markets in the 2000s housing bubble in California characterized by rising and declining residential house prices, respectively. The average house price and the surveyed geographical area are the same for both periods. Expected house ownership horizon is shown to be an important determinant of the realized search duration in addition to commonly considered housing and buyer characteristics. We find a statistically significant positive effect of it on the time until purchase in both housing price environments for consumption‐driven buyers. We also find that consumption‐driven house purchases were highly pronounced in coastal areas in the hot market and inland areas in the cold market. In contrast, long‐horizon investment activity leads that of consumption activity in those areas. Short‐horizon investors, on the other hand, concentrated their house search activity in inland areas in both housing market environments.     

A Note on the Bias in House Price Capitalization Models

Recent research efforts concerning the capitalization of low-rate, seller-supplied financing have employed hedonic pricing models that may produce biased estimates of the capitalization process. The bias results when properties sold with owner financing are included in the researcher's sample. This note discusses the nature of the bias and suggests a possible solution.