Theoretical and Empirical Considerations Regarding Space in Hedonic Housing Price Model Applications

William M. Bowen, Brian A. Mikelbank and Dean M. Prestegaard

Growth and Change, 2001, vol. 32, issue 4, 466-490

Abstract: Recent advances in spatial data analysis are making their way into a variety of applied research settings. Once purely the domain of specialists, increased availability of both spatial data and the software with which to handle them, spatial analysis techniques are diffusing into other areas of research. This article first details the rationale and need for spatial considerations in hedonic price models and focuses on the link between the context of the housing market and the statistical considerations necessary when dealing with spatial data. These issues are then explored via an application to the housing market of Cuyahoga County, Ohio. It was found, first, that explicit modeling of space is not always warranted. One of our two models shows no substantial signs of spatial misspecification. However, in the second model, where diagnostic tests call for the explicit modeling of space, some drastic differences were found between the space‐neglected model and the more correctly specified spatial hedonic model. This highlights the need to include spatial diagnostics as part of the standard model‐fitting procedure for hedonic house price applications.

Date: 2001
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