Essays on the determinants of housing prices

Date of Completion

January 2006

Keywords

Economics, General

Degree

Ph.D.

Abstract

Residential real estate values vary across space and time. Whether to own a house or not is one of the most important decisions people make. In the decision making process, subject to purchasing power, people choose the quality (e.g. physical attributes of the structure) as well as the location of the house. The factors that affect the choice of the structure are unit age, size, building materials, facilities, etc. If the structure is old, people also consider the history of the house such as information on the previous owners and any past incidents. Factors that affect the choice of location are neighborhood attributes, school district quality, property tax, employment access, and urban amenities. Government policies, laws, and regulations heavily influence these factors. In sum, many different factors and activities in the housing decision making process affect the prices or the residential real estate values.^ In this dissertation, I examine two important factors, one that influences the quality of the house and another that influences the choice of location. Three questions contribute to the development of the dissertation: (1) At a time when at least two-thirds of the US states have already mandated some form of seller's Property Condition Disclosure statement, and there is a movement in this direction nationally, I seek to identify the factors that lead states to adopt disclosure laws. More broadly, how do regulations that affect housing transactions emerge? (2) Following up on the first question, I also examine the impact of a seller's Property Condition Disclosure Law on residential real estate values. This effect involves the information asymmetry in housing transactions, and the shift of risk from buyers and brokers to the sellers. (3) A large body of evidence suggests that school quality is strongly linked to property values. Increasing levels of segregation in American schools raises the question: do home buyers pay for test scores or demographic composition? ^

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