The Journal of Real Estate Finance and Economics

, Volume 37, Issue 4, pp 317–333

Determinants of House Prices: A Quantile Regression Approach

  • Joachim Zietz
  • Emily Norman Zietz
  • G. Stacy Sirmans
Article

Abstract

OLS regression has typically been used in housing research to determine the relationship of a particular housing characteristic with selling price. Results differ across studies, not only in terms of size of OLS coefficients and statistical significance, but sometimes in direction of effect. This study suggests that some of the observed variation in the estimated prices of housing characteristics may reflect the fact that characteristics are not priced the same across a given distribution of house prices. To examine this issue, this study uses quantile regression, with and without accounting for spatial autocorrecation, to identify the coefficients of a large set of diverse variables across different quantiles. The results show that purchasers of higher-priced homes value certain housing characteristics such as square footage and the number of bathrooms differently from buyers of lower-priced homes. Other variables such as age are also shown to vary across the distribution of house prices.

Keywords

Hedonic price function Quantile regression Spatial lag 

JEL Classification

R31 C21 C29 

References

  1. Anselin, L. (2001). Spatial econometrics. In B. H. Baltagi (Ed.), A companion to theoretical econometrics (pp. 310–330). Malden, MA and Oxford: Blackwell.Google Scholar
  2. Bartik, T. J. (1987). The estimation of demand parameters in hedonic price models. Journal of Political Economy, 95, 81–88.CrossRefGoogle Scholar
  3. Durlauf, S. N., & Young, H. P. (Eds.) (2001). Social Dynamics. Cambridge, MA: MIT.Google Scholar
  4. Epple, D. (1987). Hedonic prices and implicit markets: estimating demand and supply functions for differentiated products. Journal of Political Economy, 95, 59–80.CrossRefGoogle Scholar
  5. Gould, W. W. (1992). Quantile regression with bootstrapped standard errors. Stata Technical Bulletin, 9, 19–21.Google Scholar
  6. Gould, W. W. (1997). Interquantile and simultaneous-quantile regression. Stata Technical Bulletin, 38, 14–22.Google Scholar
  7. Greene, W. H. (2000). Econometric Analysis, 4th ed., Prentice Hall, Saddle River, N.J.Google Scholar
  8. Heckman, J. J. (1979). Sample selection bias as a specification error. Econometrica, 47, 153–161.CrossRefGoogle Scholar
  9. Kim, T.-H., & Muller, C. (2004). Two-stage quantile regression when the first stage is based on quantile regression. Econometrics Journal, 7, 218–231.CrossRefGoogle Scholar
  10. Kirman, A. P. (1992). Whom or what does the representative individual represent? Journal of Economic Perspectives, 6, 117–136.Google Scholar
  11. Koenker, R., & Bassett, G. (1978). Regression quantiles. Econometrica, 46, 33–50.CrossRefGoogle Scholar
  12. Koenker, R., & Hallock, K. F. (2001). Quantile regression. Journal of Economic Perspectives, 15, 143–156.CrossRefGoogle Scholar
  13. Malpezzi, S. (2003). Hedonic pricing models: A selective and applied review. In T. O. Sullivan & K. Gibbs (Eds.), Housing economics and public policy: Essays in honor of Duncan Maclennan. Oxford, UK: Blackwell.Google Scholar
  14. Malpezzi, S., Ozanne, L., & Thibodeau, T. (1980). Characteristic prices of housing in fifty-nine metropolitan areas, Research Report. Washington, DC: The Urban Institute, December.Google Scholar
  15. Newsome, B., & Zietz, J. (1992). Adjusting comparable sales using MRA—The need for segmentation. Appraisal Journal, 60, 129–135.Google Scholar
  16. Rogers, W. H. (1993). Calculation of quantile regression standard errors. Stata Technical Bulletin, 13, 18–19.Google Scholar
  17. Rosen, S. M. (1974). Hedonic prices and implicit markets: Product differentiation in pure competition. Journal of Political Economy, 82, 34–55.CrossRefGoogle Scholar
  18. Sirmans, G. S., Macpherson, D. A., & Zietz, E. N. (2005). The composition of hedonic pricing models. Journal of Real Estate Literature, 13 (1),3–46.Google Scholar
  19. Zietz, J., & Newsome, B. (2002). Agency representation and the sale price of houses. Journal of Real Estate Research, 24, 165–191.Google Scholar

Copyright information

© Springer Science+Business Media, LLC 2007

Authors and Affiliations

  • Joachim Zietz
    • 1
  • Emily Norman Zietz
    • 2
  • G. Stacy Sirmans
    • 3
  1. 1.Department of Economics and FinanceMiddle Tennessee State UniversityMurfreesboroUSA
  2. 2.Department of Economics and FinanceMiddle Tennessee State UniversityMurfreesboroUSA
  3. 3.Department of Insurance, Real Estate and Business LawThe Florida State UniversityTallahasseeUSA

Personalised recommendations