| This paper is three essays in urban economics. The first chapter is an essay in spatial econometrics and urban form. It finds evidence of spatial autocorrelation in both house values and their hedonic residuals that is in contrast to the traditional assumption or claim of isotropy. Both house values and their hedonic residuals exhibit spatial dependence that is a function of both distance and direction. The second chapter is an essay in housing economics and policy. It finds that the experience of the federal housing voucher program in Philadelphia has yielded outcomes that are contrary to the predictions of existing models. The results indicate that the turnover rate of the housing stock in neighborhoods which disproportionately attract voucher recipients is significantly higher than the housing turnover rate in other neighborhoods, and that this higher turnover is associated with price declines. The third chapter is an essay in real estate markets and asset pricing. The capitalization rate is to real estate what P/E ratios are to other assets, but compared to other categories of assets there has been a relative paucity of empirical research examining this variable, especially for housing. This chapter develops an economic framework of cap rates that models them in the cross-section as a function of their fundamental determinants, but over time as an adjustment process around their equilibrium values. In the cross-section, cap rates do appear to accurately reflect prevailing interest rates, d expectations about both future asset appreciation and urban spatial expansion, but the tax treatment of real estate and the relative riskiness of individual properties and their neighborhoods are equally important determinants. Over time, the housing market's adjustment to a price equilibrium appears to occur with much greater speed and efficiency in the renter-occupied segment of the housing market than in the owner-occupied segment. An advantage of valuing housing with this approach is that, by placing the pricing decision within an investment framework rather than the consumption framework of the more traditional hedonic method, the risk-return profile of housing is more directly comparable to other assets competing for capital, such as debt and equity securities. |
