Dr. Steven Bourassa publishes internationallyWednesday, May 29, 2019
Dr. Steven Bourassa and colleagues have published a number of articles in the field of international real estate research.
“Estimation and updating methods for hedonic valuation” (with Michael Mayer, Martin Hoesli, and Donato Scognamiglio), Journal of European Real Estate Research, vol. 12, no. 1 (2019), pp. 134-150.
Abstract: This paper uses a large and rich data set consisting of over 123,000 single-family houses sold in Switzerland between 2005 and 2017 to investigate the accuracy and volatility of different methods for estimating and updating hedonic valuation models. We apply six estimation methods (linear least squares, robust regression, mixed effects regression, random forests, gradient boosting, and neural networks) and two updating methods (moving and extending windows). The gradient boosting method yields the greatest accuracy while the robust method provides the least volatile predictions. There is a clear trade-off across methods depending on whether the goal is to improve accuracy or avoid volatility. The choice between moving and extending windows has only a modest effect on the results. The results should prove useful in improving hedonic models used by property tax assessors, mortgage underwriters, valuation firms, and regulatory authorities.
“Measuring house price bubbles” (with Martin Hoesli and Elias Oikarinen), Real Estate Economics, vol. 47, no. 2 (2019), pp. 534-563.
Abstract: Using data for six metropolitan housing markets in three countries, this paper provides a comparison of methods used to measure house price bubbles. We use an asset pricing approach to identify bubble periods retrospectively and then compare those results with results produced by six other methods. We also apply the various methods recursively to assess their ability to identify bubbles as they form. In view of the complexity of the asset pricing approach, we conclude that a simple price-rent ratio measure is a reliable method both ex post and in real time. Our results have important policy implications because a reliable signal that a bubble is forming could be used to avoid further house price increases.
“Folk custom and home improvement decisions” (with Wen-Chieh Wu and Yu-Chun Ma), International Real Estate Review, vol. 21, no. 3 (2018), pp. 317-341.
We test whether Chinese folk customs and taboos have impacts on the home improvement decisions of Taiwanese homeowners. Based on traditional Chinese culture, we choose dragon and widow’s years as indicators of auspicious (fortune) and inauspicious (taboo) times, respectively. Using a Heckman two-stage estimation approach, our empirical results provide evidence that traditional Chinese folk customs and taboos indeed play roles in decisions on home improvement. We find that the likelihood of a homeowner making home improvements falls significantly at the so-called taboo time. Moreover, we find that expenditure on home improvements rises at the so-called fortune time, particularly in areas outside the capital city region. In addition to considering the impacts of folk customs on home improvement decisions, this paper contributes to the literature by establishing a theoretical model that reflects the fact that homeowners play dual roles as both consumers and suppliers of housing.