An Empirical Examination of Traditional Neighborhood Development

This study analyzes the impact of the new urbanism on single-family home prices. Specifically, we explore the price differential that homebuyers pay for houses in new urbanist developments relative to houses in conventional suburban developments. Using data on over 5,000 single-family home sales from 1994 to 1997 in three different neighborhoods, hedonic regression results reveal that consumers pay more for homes in new urbanist communities than those in conventional suburban developments. Further analyses indicate that the price premium is not attributable to differences in improvement age and other housing characteristics.     

Valuing New Urbanism: The Case of Kentlands

This study assesses the impact of new urbanism on single-family home prices. Specifically, we use Duany and Plater-Zyberk's traditional neighborhood development (TND) of Kentlands and surrounding conventional subdivisions to estimate the premium, if any, that single-family homeowners are willing to pay to reside in a community with new urbanist features. Using data on 2,061 single-family home transactions and several hedonic price models, the empirical evidence reveals that consumers are willing to pay a premium to locate in Kentlands.     

Big House, Little House: Relative Size and Value

How do markets value relative house size in a neighborhood? The literature offers differing rationales: atypical houses sell for less, capitalization of property taxes penalizes larger and benefits smaller houses in mixed neighborhoods and conspicuous consumption reinforces the value of relatively larger houses and reduces the value of relatively smaller houses to consumers. Using a simultaneous price‐liquidity model that controls for neighborhood supply and demand conditions, this article finds a dominant tax capitalization effect on price and marketing time that appears to override any extant atypicality or conspicuous consumption effects.     

Why Do Vacant Houses Sell for Less: Holding Costs,Bargaining Power or Stigma?

This article introduces Nash bargaining into a search model to identify various channels through which vacancy affects selling price and liquidity in the resale market for houses. The model shows the various vacancy effects in the form of greater seller holding cost, lower seller bargaining power and unobserved negative attributes or stigma. We use a 20‐year data series on house transactions to test for these effects in a simultaneous model of price and liquidity, using the long data series to allow for variation across market phases. The robust vacancy effects on price and liquidity across all market phases primarily reflect greater seller holding cost and diminished bargaining power. Repeatedly, vacant houses also exhibit significant stigma effects in the rising market but not in stable or declining market phases. At the same time, vacant houses enjoy stronger shopping externality effects from surrounding houses for sale than do their occupied counterparts.     

An Investigation of the Major Influences of Residential Liquidity: A Multivariate Approach

The liquidity of the single-family home has been potentially compromised by prevailing conventional mortgage market conditions in the 1980s. The primary objectives of this study are to investigate the degree of liquidity of a given residence, defined to incorporate both the "recovery-of-value" and "timeliness" dimensions, and the major influences upon such liquidity. The multivariate techniques of canonical correlation and multiple discriminant analysis are employed to identify those property characteristics and/or prevailing mortgage market conditions that most appreciably influence the liquidity of a residential listing.     

Discount Brokerage in Residential Real Estate Markets

Transaction costs are thought to affect asset prices and market liquidity, but the direction and magnitude of these effects continue to be the subject of debate. In the single‐family residential market, discount brokers offer to list a house for a lower price and thus reduce the transaction costs associated with obtaining a match. In this article we obtain empirical estimates of the price and liquidity impact of a seller selecting a discount broker to market a single‐family residential property. The unique data set allows for the identification of residential properties that were listed by a discount brokerage firm. The empirical results confirm the predictions of our theoretical model. Using a sample of 318,221 listings and 243,625 sales, we find that houses listed by discount brokers sell at prices similar to non‐discount brokerage listings, but are less likely to sell, and when they do sell, take approximately three days longer to sell. The results indicate that lower transaction costs do not impact housing prices in this market, but that they are related to asset liquidity.     

Substitutability and Complementarity of Urban Amenities: External Effects of Built Heritage in Berlin

This article analyzes the impact of designated landmarks on condominium transaction prices in Berlin, Germany. We test for price differentials between listed and nonlisted properties and study their impact on surrounding property prices. The proximity to built heritage is captured by the distance to listed houses and heritage potentiality indicators. Impact is assessed by applying a hedonic model to microlevel data, and this process also addresses spatial dependency. While our findings suggest that designated landmarks do not sell at a premium or discount, landmarks are found to have positive external effects on surrounding property prices within a distance of approximately 600 m.     

Forecasting Prices and Excess Returns in the Housing Market

The paper uses quarterly indexes of existing single-family home prices estimated with microdata on properties that sold more than once to estimate excess returns to investment in owner-occupied housing. Housing prices and excess returns are estimated over the period 1970:1 to 1986:3 for Atlanta, Chicago, Dallas, San Francisco. Using time-series cross-section regressions we test for the forecastability of prices and excess returns using a number of independent variables. Price changes in one year tend to continue for more than one year in the same direction. The ratio of construction costs to price, changes in adult population and increases in real per capita income all are positively related to excess returns or price changes over the subsequent year. The results add weight to the argument that the market for single-family homes is inefficient.     

Price Behavior and Capital Gains on Residential Real Estate: The Case of Sweden*

During most of the postwar period the increase of the prices of single-family homes in Sweden have exceeded the general inflation, while for several years the opposite is true of apartment houses. We discuss the reasons and present estimates of capital gains attached to this price behavior. It turns out that apartment houses have often yielded nominal but no real capital gains. Single-family homes have yielded real accrued capital gains amounting to approximately 3% of GNP during the period 1963–1976. We also present a rough indirect method of estimating realized capital gains, first disregarding, and then including the effects of loans.     

The Capitalization of School Quality into Renter and Owner Housing

Residential property amenities including school quality should be capitalized into both rent and property sale prices. Evidence of price and rent premiums for higher school quality is provided. The price premium for school quality for owners exceeds the premium for renters. The premiums paid by renters and owners vary with the likelihood the household directly uses school services, housing market conditions, whether the property is in an urban or suburban area and by the observed school quality in the years leading to the transaction. The larger price premium paid by owners is supported by enhanced liquidity and tempered price volatility for properties located in quality school districts.     

Creative Financing and House Prices: A Theoretical Inquiry into the Capitalization Issue

Since buyers offer a premium for access to creative financing (CF), creatively-financed houses will sell for more than otherwise identical houses purchased with standard financing. A commonly suggested method for adjusting house values to eliminate the effects of CF is the "cash equivalence" method, where the CF premium is assumed to equal the present value of savings from CF. This paper shows that in a world with active housing speculators, the cash equivalence approach gives the right answer: In an "arbitrage" equilibrium, house values must differ by exactly the present value of CF savings. Further analysis shows that when capital markets are perfect, each consumer is indifferent between CF and standard financing when arbitrage equilibrium obtains. Without perfect capital markets, however, consumers will strictly prefer one financing mode or the other.     

Ethnicity in housing markets: Buyers,sellers and agents

This paper examines how ethnicity related to cultural differences arising from ethnic background affects housing market transactions in the Atlanta metro area. Using both the US Census and Wikipedia approaches to infer ethnicity from individuals' names, we find that the interplay of buyer, seller, and agent ethnicity composition affects interaction in the housing market. Sellers working with listing agents in the same ethnic group set higher listing prices and enjoy higher selling prices and quicker sales. Agents working with same ethnicity buyers yield higher prices and liquidity. Even though sellers only communicate with buyers through their agents, houses sold by sellers to buyers of same ethnicity have higher prices and sell faster. And while the ethnic mix of agents and their clients matter, the ethnic mix of agents in the transaction does not.     

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.     

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.     

Estimation of Depreciation for Single-Family Appraisals

Methods for the estimation of depreciation within the cost approach to appraisal of single-family residential property have been the focus of very few empirical studies. The purpose of this study is to generate empirical evidence related to one such method, specifically the age-life method. Within the context of a hedonic price model, functional form of the model and the design of the age variable are chosen so that we can test for alternative paths of depreciation with just one model. The alternative paths can be concave, convex or straight-line. Contrary to the evidence presented in several previous studies, the empirical evidence presented in this paper supports a path of depreciation for single-family houses that is concave (i.e., initially less rapid than straight-line). Of the standard paths of depreciation often suggested, the reverse sum of the years digits path most closely approximates the path indicated as appropriate by this study, particularly in the early years of the life of a house. If appraisers are looking for an approximation of the path of depreciation for single-family residences, it would appear that the reverse sum of the years digits path is much more appropriate than the straight-line path that is often assumed.     

Transportation, Sorting and House Values

In this paper, we examine the importance of accessibility to employment and transportation system attributes for residential location choice, car ownership and house values. Using the 1980 Census of Housing and Journey to Work data merged with transportation system data, we find strong evidence of residential sorting based on employment location. We find that suburban areas with good commuter rail access to the CBD have significantly greater fractions of their labor force working in the CBD, own fewer cars and have higher house prices than similar neighborhoods and houses in census tracts without service. The house value premium is over 6.4%.     

Product Line Rivalry and Market Segmentation—with an Application to Automobile Optional Engine Pricing

This paper addresses the questions whether and when the pricing practices on base products may differ from those of premium products, sold with options or add-ons. Various alternative models are considered: a monopoly model, a model of brand rivalry with full consumer information and a model of rivalry in which consumers are only well informed about base product prices. Only the brand rivalry model with limited consumer information predicts that premium products have larger percentage markups than base products, provided that brand rivalry is sufficiently intense. Empirical evidence on base and premium product pricing in the automobile market is consistent with the limited information model and inconsistent with the other two models.     

The Effects of Charm Listing Prices on House Transaction Prices

As is the case for many different goods and services, it is common practice in many real estate markets for sellers to offer properties for sale at listing prices just below some round number price ( e.g. , $99,900 instead of $100,000). The academic marketing literature refers to this practice as "charm" pricing and suggests that this strategy is an attempt by sellers to take advantage of buyers' cognitive processes in which charm prices affect buyers' perceptions about the seller or the item being offered for sale. Although numerous papers in the housing economics literature have addressed the impact of the magnitude of listing price on observed house transaction prices, no prior published study has considered the impact of the design of listing prices in housing markets. This paper presents an empirical investigation of the effects of charm pricing on house transaction prices using sample data. The results provide some evidence that houses listed at certain charm prices sell for significantly greater transaction prices than those listed at round number prices.     

Measuring Residential Real Estate Liquidity

There are many factors, other than price alone, that may affect the liquidity of real estate. This study develops a liquidity measure based on the Cox proportional hazard technique, a statistical model widely used in the epidemiologic and social sciences. The odds ratio, along with an estimate of market value for a home, are used to construct a liquidity measure. This measure can extract from the data a rich statistical profile of the variables that affect liquidity.     

The Duration of Marketing Time of Residential Housing

The marketing of unique durable goods such as housing presents a good example for the application of search theory. An optimal stopping rule strategy is employed to model sellers' behavior. The primary hypothesis is that the greater the atypicality of a house, the greater the expected variance of offers. Because a maximizing seller will wish to entertain more offers the greater is the variance, the marketing time of atypical houses will be relatively longer than that of standard houses. Using a sample of resale houses, the empirical study uses a failure time model to confirm the hypothesis. Extensions are mentioned, including discussions of the role of the list price and the limitations of the standard hedonic regression approach when applied to housing.