Although it is widely accepted that urban housing markets are too complex to be described by unitary market, equilibrium models, the role of submarkets has not been embraced in applied research. In this paper it is argued that this is unsurprising and can be traced to the failure to establish a theoretical or empirical basis for submarket modeling. I note that, throughout the housing economics literature, the term ‘submarket’ is subject to a range of definitions; the means of identifying submarkets has varied; empirical analyses have employed differing tests; and case studies have focused on a range of different cities and different time periods. This inconsistency has prevented the development of a coherent analytical approach. By using data from the Glasgow housing market a range of alternative definition and identification schemes are compared. The evidence suggests that submarkets are important and that, rather than being based exclusively on the similarity of property characteristics or geographical contiguity, the dimensions of housing submarkets are determined by both spatial and structural factors simultaneously.
We extend the literature on the impact of externalities using an approach based on a hybrid of hedonic and repeat-sales methods. The externality in question is groundwater contamination in Scottsdale, Arizona. The use of condominium sales allows us to assume that major physical characteristics remain unchanged, but location parameters may be altered by urban growth and development as well as contamination. We find an economically significant discount for properties located in the contaminated area. Interestingly, it does not appear until several years after the contamination becomes publicly known, and it seems to have disappeared before the end of the study period.The last three decades have seen the emergence of a voluminous literature examining the interaction between environmental factors and real estate markets, much of it concerning the extent to which negative environmental spillovers are capitalized into real estate values. These interests have given rise to two broad categories of real estate literature reviewed in Jackson (2001). The first of these is dominated by the appraisal profession and has focused on valuation concepts and methods (see, e.
In the 1950s and 1960s a group of housing economists at ColumbiaUniversity developed a framework for the analyses of urban housing markets which was based around the concept of housing submarkets and household migration. There is now widespread agreement amongst housing economists that submarkets should be adopted as a working hypothesis but the concept has been reformulated in terms of intra-urban relative house price differentials. The accepted test for submarket existence uses a hedonic model of house prices which assumes market equilibrium. This paper returns to an analysis of submarkets which focuses on spatial migration patterns. By examining household intra-urban mobility patterns in the Glasgow housing market it is possible to demonstrate that submarkets tend to be self-contained. The analysis also suggests that the current standard statistical tests may be incomplete and in the case of Glasgow underestimate the number of submarkets.
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