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The
Value of Housing Characteristics
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A house is made up
of a large number of physical and locational attributes
that can either add to, or subtract from, its value
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This study uses a
detailed data set of property sales from the
Philadelphia area to access how various attributes
affect a home's value.
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The conclusions of
this study are consistent with previous research based
on more limited data. More importantly, this study
provides a far richer level of detail about the effects
of a home's attributes on selling prices.
A house is made up of a
number of attributes that determine its value or selling
price. Because all properties are unique in any number
of ways, determining how all of the physical and locational
characteristics affect the value of a home can be
difficult.
The Study
This study uses data
encompassing more than 28,800 residential property sales
from 21 counties in the Philadelphia area over the period
1996 through the first quarter of 2003. Hedonic
regression, a widely employed method of statistical analysis
that has been the basis of a number of earlier studies of
property value, was used to statistically disentangle the
relative effects of property characteristics on a home's
selling price. The study also examines how these
characteristics differentially affect selling price across
several counties. This study is unique in that a
far more detailed collection of property characteristics and
actual selling price (not listing price) have been used in
the analysis.
Findings
The results of this
study generally are consistent with the conclusion of
earlier research. For example, larger homes and homes
with more bedrooms and bathrooms sell for more after
controlling for all other physical, locational and quality
features. More importantly, however, this analysis
also provides estimates of how much more or less homes with
particular characteristics can be expected to sell for.
For example;
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each
additional 1,000 sq. feet of living space
increases selling price by about 3.3 percent; |
| * |
each
additional bedroom adds
about four percent to price |
| * |
bathrooms
have
a dramatic effect on selling price with each full
bath adding about 24 percent |
| * |
central
air conditioning adds
about 12% to price; |
| * |
nine
foot ceilings add
about six percent to price; |
| * |
a
basement increases value by nine
percent; |
| * |
a
laundry in the basement decreases
value by nine percent; |
| * |
fireplaces
have
a strong, positive effect on selling price with
each fireplace adding about 12 percent; |
| * |
a
garage adds about 13 percent to
selling price |
| * |
an
in-ground swimming pool adds about eight percent
to value while an above ground pool adds no value; |
| * |
close
proximity to golf adds eight
percent to the selling price. |
Despite differences in
the average home sales price in each of the counties, the
estimated effects of house attributes on price were
generally consistent with the conclusions from the analysis
of the entire 21 -county area. The effects of most
characteristics also were similar when comparisons were made
between sales during the period from 1996 to 1999 and the
period 2000 through the first quarter of 2003.
Homeowners must
be keenly aware of the trade-offs when making remodeling
decisions, especially if these renovations are done in
anticipation of selling the home. My job
is to assist home sellers in the
pricing of their home, determining which attributes add
value ( or detract from the home's value) is an important
aspect of the overall marketing plan. The conclusion
from this study can be used as a guide along with
local market expertise, in determining how different
attributes of a home affect its value.
Florida State University
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