Semi-Parametric Interpolations of Residential Location Values: Using Housing Price Data to Generate Balanced Panels

Clapp, John M.; Cohen, Jeffrey P.; Coughlin, Cletus C.

Working Paper

Semi-Parametric Interpolations of Residential Location Values: Using Housing Price Data to Generate Balanced Panels

Abstract: We estimate location values for single family houses by local polynomial regressions (LPR), a semi-parametric procedure, using a standard housing price and characteristics dataset. As a logical extension of the LPR method, we interpolate land values for every property in every year and validate the accuracy of the interpolated estimates with an out-of-sample forecasting approach using Denver sales during 2003 through 2010. We also compare the LPR and OLS models out-of-sample and determine that the LPR model is more efficient at predicting location values. In a balanced panel application, we use GMM estimation to examine how the location value estimates are affected by airport infrastructure investments.

Keywords: Land Values; Semi-Parametric Estimation; Local Polynomial Regressions; Balanced Panel; Fixed Effects;

JEL Classification: C14; H41; H54; R51; R53;