The Economic Theory of Housing Demand: A Critical Review

Despite thirty years of modeling housing markets, housing analysts still have difficulty accurately assessing housing demand. This article reviews the current state of the art in economic modeling of housing demand determinants and suggests a future direction for further research. The fully developed economic theory of the housing market for analyzing housing decisions is the neoclassical consumer theory of housing demand. The review of the various modifications that have been made to better operationalize the imperfect and noncompetitive features of the housing market show that these modifications have been introduced in several partial models. These models include tenure choice models, search models, mobility models, and housing trait models. There is currently no single model that incorporates all of the modifications attempted in these partial models. In fact, it may be impossible to operationalize and incorporate all of the modifications of the neoclassical model into a single model. Therefore, the most feasible and conceptually correct research strategy to advance our understanding of housing consumption decisions is to analyze the impact of demographic and social processes on housing consumption decisions. There is a need to research how to include demographic and sociological constructs that capture the attitudes, preferences, and perceptions of the consumer into the classical economic model of housing demand.

The decline and rise of neighbourhoods: the importance of neighbourhood governance

There is a substantial literature on the explanation of neighbourhood change. Most of this literature concentrates on identifying factors and developments behind processes of decline. This paper reviews the literature, focusing on the identification of patterns of neighbourhood change, and argues that the concept of neighbourhood governance is a missing link in attempts to explain these patterns. Including neighbourhood governance in the explanations of neighbourhood change and decline will produce better explanatory models and, finally, a better view about what is actually steering neighbourhood change

Housing Preferences of Asian and Hispanic/Latino Immigrants in the United States: A Melting Pot or Salad Bowl

Several factors affecting household formations of first‐ and second‐generation Asian and Hispanic/Latino immigrants are identified, including contextual social interaction effects. Using household data from the American Housing Survey and Public Use Micro‐data Sample, we find that first‐generation Asian and Hispanic/Latino immigrants are more likely to live in coresidence households; and this is influenced by immigrant gender, age, education, income, employment and density. Education and income are inversely related to coresiding, while higher immigrant density increases the propensity to coreside. Contextual effects reveal that neighborhoods with a relatively large Caucasian average household size increase coresidence behavior among immigrants; and the income of Caucasians living in the area is inversely related to immigrant coresiding behavior. Second‐generation Asian immigrants are more likely to live independently, while second‐generation Hispanic/Latino immigrants have a higher propensity to coreside; however, they are influenced contextually by geographic household and income patterns. We further specify findings by considering local housing price, the fusion of immigrants in the United States, agglomeration of immigrants in central city and a comparison between immigrants in United States and similarly aged natives in China. Our results are robust to potential sample‐selection bias and social interaction boundary selection bias

Design principles in housing for people with complex physical and cognitive disability: towards an integrated framework for practice

To develop a research-based environmental framework to guide the design and construction of suitable residential dwellings for individuals with complex disability. An environmental approach to housing design and development recognises that there are physical, psychological and social components relating to housing design, dwelling location and the neighbourhood context, and that these elements interact to affect the physical, psychological, and social wellness of individuals. Following theoretical review and synthesis, a comprehensive set of design features that are conducive to residents’ wellness and quality of life are described. It is clear that housing design and development for people with complex disability ought to consider the physical, social, natural, symbolic, and care environment in relation to housing design, dwelling location, and the neighbourhood context for improved housing outcomes. An integrated housing design and development framework is presented. It is hoped this practical matrix/evaluative tool will inform future inclusive housing design and development decisions in Australia and internationally. The application of this framework is especially relevant to political climates striving to achieve design innovation to increase housing choice for people with complex disability

Racial and ethnic differences in housing demand: An econometric investigation

This article empirically investigates the sources of housing demand differences between racial (black and white) and ethnic (Hispanic and non-Hispanic) groups. We estimate the tenure-adjusted housing demand equations from the 1989 American Housing Survey (AHS) national sample data and measure the effects of different sources for demand disparities in housing demand, but much less so in explaining racial differences in housing demand. Specifically, 98% (96%) of the housing demand differences between Hispanic and non-Hispanic owners (renters) is due to differences in group endowments. For the racial groups, 29% (51%) of the housing demand differences between black and white owners (renters) is attributable to differences in group endowments. The residual differences explain 71% and 49% of the black-white differentials for owners and renters, respectively. The residual components in our model capture the effect of institutional and structural factors intrinsic to the housing market (such as racial discrimination or residential segregation) and/or the influence of important omitted or harder-to-measure variables correlated with race or ethnicity (such as wealth, employment history, credit history, and cultural differences in housing consumption). © 1996 Kluwer Academic Publishers.1

Appraisals, Transaction Incentives, and Smoothing

This article is structured around three principal objectives. The first is to determine whether any incentives for appraisals support an underlying purchase offer, which may be termed a transaction bias. Appraisals that are lower than purchase prices could involve additional cost for justification and thus undermine the transaction. The second objective is to test whether appraisal data are smoothed or exhibit less volatility than purchase data. The article compares the volatility of separate appraisal and purchase data. Given separate appraisal and purchase time series, the third objective is to derive the implied optimal appraisal updating rule. The model is applied to appraisal and purchase price indices for 3.7 million repeat transactions on mortgages bought by Fannie Mae and Freddie Mac by using monthly data from January 1975 to December 1993. The estimation procedure uses generalized autoregressive conditioned heteroskedastic (GARCH) analysis to take account of persistence in means and volatility in the house price time series. The article draws three principal conclusions. First, appraisals are systematically higher than purchase data, a first-moment differential. Second, appraisal smoothing does not occur generally. Third, the appraisal updating rule for the United States appears to involve error correction whereby underappraisals from pervious periods are eventually adjusted.