Predicting housing prices at alternative locations and under alternative scenarios of the spatial job distribution

Abstract

Alternative hedonic model formulations are used to compare predicted and observed prices of property transactions at alternative locations. The estimation of model parameters is based on data from western Norway. In addition to evaluating the predictability of alternative model formulations we study how housing prices in different areas are affected by changes in the spatial distribution of employment. Alternative scenarios of job relocations are considered. We find that the local impact of labor market shocks is negatively related to the degree of urbanization in the relevant area. A centralization of job opportunities has a relatively marginal influence on the spatial pattern of house prices, while the reverse is not true for a decentralization of job opportunities. Further, a negative shock gives a quantitatively larger effect on house prices than a corresponding positive shock.