David Dale-Johnson

What happened to the CBD-distance gradient?: land values in a policentric city

Hedonic regression methods are used to assess the impact of dwelling and structure characteristics, neighborhood effects, and multiple locations on a sample of almost 11000 residential property sales in Los Angeles County in 1980. Correction for the dwelling characteristic permits the analysis to be interpreted in terms of land values rather than property values per unit area. The selected equation explains more than 93% of the variation in the dependent variable (house price per unit of lot area). All the independent variables (five property or transaction characteristics, four neighborhood effects, and ten locational nodes) are statistically significant, with one major exception: distance from the CBD, which has a very low /-value and an unexpected sign. This result should be considered in the context of many superficial references, based largely on visual symbols such as new office buildings, to a revival of downtown Los Angeles. The authors interpret the finding that eight subcenters have a statistically significant influence on metropolitan residential land values in Los Angeles as yet another indication of the demise of the monocentric model and the need to discuss VS metropolitan areas in policentric terms.

An alternative approach to housing market segmentation using hedonic price data

Abstract Much empirical research has been devoted to housing market segmentation and the implications for the application of the Hedonic Price Model. Market segmentation is demonstrated empirically in ( J. Urban Econ. , 3 :2, 146–166 (1976); J. Urban Econ. , 7 :1, 102–108 (1980); Rev. Econ. Statist. , 66 :3, 404–406 (1974)). There appears to be theoretical evidence ( J. Pol. Econ. , 82 :1, 34–55 (1974)) that such empirical efforts may have been less than adequate. Unfortunately, the empirical applications of Rosens model ( J. Environ. Econ. Manag. , 5 , 81–102 (1978); J. Urban Econ. , 5 , 3, 357–369 (1978)) do not seem to effectively account for the complexity of the factors which cause multiple equilibria (market segmentation). This paper demonstrates empirically that market segments can be defined along more dimensions than hitherto have been included in any analysis.

Residential property values, the CBD, and multiple nodes: further analysis

In this paper, a hedonic regression model of house prices in Los Angeles County is tested with use of 1970 and 1980 data on dwelling characteristics, neighborhood variables, and measures of accessibility to the central business district and subcenter nodes. Many of the coefficient estimates on the dwelling traits and neighborhood variables are robust, and where coefficients change there are obvious explanations. The most dramatic finding is that the distance to the CBD, with a weak but statistically significant influence in 1970, had no influence by 1980, and its declining role was paralleled by a rise in the spatial pull of several of the subcenters in the region. The tests reveal how the polycentricity of the Los Angeles region evolved during the 1970s.

Long-Term Ground Leases, the Redevelopment Option and Contract Incentives

Ground leased property trades at a discount relative to the fee interest. We explore contractual alternatives that would be Pareto preferred by owners of the leased fee estate and the leasehold interest. The sharing of the value of the residual claim between the owner of the leased fee and the leasehold and a lease extension clause triggered by redevelopment can enhance the value of the asset to both parties. The results suggest that employing such contractual terms in ground leases in the United States would lead to outcomes more consistent with the fee simple case. Escalation clauses also have a potential impact on the timing and intensity of redevelopment.

Housing Attributes Associated with Capital Gain

Housing units are heterogeneous goods. Rates of change in housing prices are typically modelled as if they arise from factors unrelated to the housing unit itself. For example, housing price increases in the latter part of the 1970s and early 1980s are argued to have arisen primarily from demographic factors and the differential effects of inflation on the effective rate of taxation on income from corporate capital and on owner-occupied housing. Cross-sectional variation in price inflation is not addressed. Consumers who purchased housing units are not indifferent to their attributes. To the extent that expectations vary within regional housing markets as a consequence of variation in housing attributes, standard linear hedonic price regression may generate biased estimates of implicit prices. This paper identifies sufficient conditions for the estimates of implicit prices in linear hedonic price regressions to be unbiased and generate unbiased estimates of implied price changes. Finally, this paper identifies living space (house size) as a significant attribute related positively to the increase in individual housing prices in a regional market. Copyright American Real Estate and Urban Economics Association.

Coastal Development Moratoria and Housing Prices

This article draws upon event study methodology typically employed in the field of empirical finance to explore the impact of a development moratorium on housing prices in Los Angeles County. Time-series analysis is employed to examine hedonic price-series, return-series, and cumulative returns for prototypical housing units by geographic location and housing type based on ex ante hypotheses about the relative impact of a coastal development moratorium on the market segments that these price and return data represent. In particular, housing prices, returns, and cumulative returns inside and outside the impacted area are examined as are the same measures for housing segmented by age and density. Housing prices in the impacted area experience a significant sustained increase of 6.8 percent and a 10.9 percent spike as of the event date relative to housing prices outside the area. Perhaps more convincing is a cumulative increase in relative returns of over 26 percent in the impacted area versus the inland area during the 22 months prior to the event date. The difference in returns is not significant after the event date. Consistent results are found for properties segmented by age and density. Application of this approach depends on the availability of large volumes of transactions to permit the construction of price-series and return-series in the market segments suggested by the research design.

Clientele Effects on the Demand For Housing Price Appreciation

If house buyers are segmented by income, one might expect to observe buyers in such markets valuing the benefits of expected capital gain differently. Presumably, individuals experiencing higher marginal tax rates should be inclined to pay relatively more for anticipated capital gain since the opportunities of sheltering such income from taxation are greater. This paper attempts to identify a proxy for expected capital gain by using the hedonic price methodology to predict a recent price series for each housing unit in a sample of sales. That proxy is then used to determine an individual buyers marginal willingness to pay for anticipated price appreciation. The results indicate that one cannot reject the joint hypothesis that homebuyers naively extrapolate from prior implied price performance to establish future price expectations and the variation in willingness to pay for that expectation may be a function of the buyers income. This suggests the existence in housing markets of a phenomenon termed the clientele effect. This effect has been the subject of considerable examination in the finance literature.

Valuation and Efficiency in the Market for Creatively Financed Houses

This paper examines two alternative approaches to valuing the impact of creative financing on housing prices. The cash equivalence adjustment which is the generally accepted approach is compared to an approach known as the financed fee valuation adjustment which is argued to be theoretically superior. A sample of 45 matched pairs of condominium sales in which one of the units is creatively financed and the other is conventionally financed is employed to test which model is most effective at explaining the market adjustment for creative financing. The authors are unable to reject the hypothesis that the housing market being examined is efficient and that the financed fee valuation adjustment is a superior model for valuing the impact of creative financing. Copyright American Real Estate and Urban Economics Association.

An Examination of the Impact of Rent Control on Mobile Home Prices in California

This study examines the impact of rent control of mobile home parks in seven counties of California between 1983 and 2003. We assembled an extensive and timely data set and, thus, were able to test more carefully specified econometric models than had been employed in prior studies of California mobile-home rent control. We find that the nature of the rent control regime differentially impacts mobile home prices: the imposition of rigid rent control, rent control without vacancy decontrol, leads to higher growth rates in resale prices. While a flexible regime, or rent control with vacancy decontrol, results in lower growth rates in resale prices. This is consistent with economic theory, suggesting that the imposition of rigid rent control will lead to the capitalization of future rent savings when a coach is sold. That is, the buyer will not only pay for the coach but also for the net present value of the expected savings associated with the future legally constrained pad rent obligations to the landlord.

Introduction: Deregulation and Reform of Housing and Housing Finance Markets: Recent Lessons from Western and Central Europe

Recent years have seen the emergence of substantial scholarly research devoted to cross-national comparisons of real estate markets and financial institutions. In part, these analyses evaluate real estate market efficiency and the distributional outcomes associated with diverse institutions and economies. Further, these analyses draw from the experience of different markets and institutions in a normative sense, so as to help facilitate the development of appropriate real estate market mechanisms and policy in emerging market economies. Copyright American Real Estate and Urban Economics Association.