The Urban Homeowner's Residential Location Decision in an Asset‐Pricing Context

Kenneth Wieand

Real Estate Economics, 1999, vol. 27, issue 4, 649-667

Abstract: Homeowners determine the maximum site bid price for homeowner housing within a two‐period expected‐utility model. The bid price is a function of the expected cash flows to sites, the quantity of housing consumed and a relocation option. The bid price is derived in the general case as a function of the homeowner's portfolio risk, including the total risk to the site, and the market price of risk. The bid price is derived under a spatial measure as a function of distance from an arbitrary location. Specific results are obtained when the household experiences log‐linear utility for housing and other goods. Use of the market price of risk simplifies analytical solutions to the bid price equation.

Date: 1999
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