Using Quantile Regression in Hedonic Analysis to Reveal Submarket Competition

Michael C. Farmer () and Clifford A. Lipscomb ()
Additional contact information
Michael C. Farmer: Texas Tech University
Clifford A. Lipscomb: Valdosta State University

Journal of Real Estate Research, 2010, vol. 32, issue 4, 435-460

Abstract: A root concern of hedonic property value models is that some commonly-used estimators aggregate very diverse households into a single regression, which may explain the marked differences in implicit price estimates for the same housing attributes across studies. In this paper, we extend a model that captures household heterogeneity through submarket identification and use quantile regression analysis to explore the role submarket competition plays in setting housing prices in those price ranges where different submarkets occupy homes of similar price. We find evidence of direct competition between submarkets with different preferences for at least some homes in a single neighborhood market. We cluster packages of attributes into three broad indices: dwelling structure variables, location variables, and adjacency variables. In the price ranges of competition between two submarkets, there is a clear premium paid in one of the indexed attribute by the final occupant to ‘outbid’ a member from another submarket. The attributes that realize a premium are those that are expected from prior analysis on what those submarkets prefer; and these premiums introduce variation in housing prices that would not be captured by standard hedonic approaches. By examining hedonic parameter instability at different housing price levels, we uncover not only latent diversity among homeowners but direct competition between them that calls into question policy and market conclusions drawn from standard hedonic price models, especially large sample hedonic studies.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://pages.jh.edu/jrer/papers/pdf/past/vol32n04/04.435_460.pdf Full text (application/pdf)

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:jre:issued:v:32:n:4:2010:p:435-460

Ordering information: This journal article can be ordered from
Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
http://pages.jh.edu/jrer/about/get.htm

Access Statistics for this article

Journal of Real Estate Research is currently edited by Dr. Ko Wang

More articles in Journal of Real Estate Research from American Real Estate Society American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323.
Bibliographic data for series maintained by JRER Graduate Assistant/Webmaster ().