Estimating location premia using fixed effects—A semi‐local approach

Stanley D. Longhofer and Christian L. Redfearn

Real Estate Economics, 2025, vol. 53, issue 2, 391-413

Abstract: In this article, we develop a novel method for measuring the value of location within a metropolitan area. By estimating overlapping “semi‐local” regressions and exploiting the symmetry among them, we are able to construct a surface of the relative value of location within a metropolitan area. This methodology maintains the simplicity of using location fixed effects while resolving the omitted variable bias that arises from the traditional application in hedonic regressions. We demonstrate our semi‐local approach using a flexible, hex‐based geography. We also show that it can be generalized and applied to other geographies such as census tracts. Using data from Maricopa County (Phoenix), we find that every geography we employ supports the same conclusion: the premium for location is decidedly nonmonocentric, asymmetric, and highly dynamic. This dynamism conflicts with the typical assumptions associated with the use of fixed effects in the construction of aggregate price indexes, and potentially complicates the interpretation of difference‐in‐difference methods.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/1540-6229.12523

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:reesec:v:53:y:2025:i:2:p:391-413

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1080-8620

Access Statistics for this article

Real Estate Economics is currently edited by Crocker Liu, N. Edward Coulson and Walter Torous

More articles in Real Estate Economics from American Real Estate and Urban Economics Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().