On the use of grouping methods in the analysis of residential housing markets

In this article we employ four different statistical techniques (geographic, AID, cluster and discriminant analysis) to define homogeneous groupings of houses within an urban area. Analysis of a sample of data from Fayette Country, Kentucky indicates that each of these methods produces distinguishable homogeneous groupings of properties. Predictions of house values are compared using data from Lane County, Oregon, San Mateo County, California, and Fayette County. The major conclusions of the study are that there are no discernible differences among the four methods and that predictions made ignoring the grouping information are as accurate as those obtained by grouping.