IDEAS home Printed from https://ideas.repec.org/a/kap/decono/v172y2024i4d10.1007_s10645-024-09446-2.html
   My bibliography  Save this article

Housing Market Segmentation: A Finite Mixture Approach

Author

Listed:
  • Steven C. Bourassa

    (University of Washington)

  • Martijn I. Dröes

    (University of Amsterdam
    Amsterdam School of Real Estate (ASRE))

  • Martin Hoesli

    (University of Geneva
    University of Aberdeen Business School, University of Aberdeen)

Abstract

This paper investigates the usefulness of adding a discrete choice model to the hedonic model via a finite mixture approach. Our approach leads to different hedonic models for different housing market segments based on household information. As such, the proposed method goes beyond measuring the average price of housing attributes. As a case study, we estimate the finite mixture model for the Miami and Louisville metropolitan areas using information on race, ethnicity, and income from the American Housing Survey. We find that the model outperforms the standard hedonic model or a model with linear interaction terms between demographics and housing characteristics. Moreover, market segmentation is based on a complex combination of race, ethnicity, and income. For Louisville, Black households need 2.5 times higher income than White households to advance to a higher market segment and even at high incomes tend to occupy their own segment. For Miami, low-income, non-Hispanic households live in their own segment even if occupying the same dwelling size as households in other segments.

Suggested Citation

  • Steven C. Bourassa & Martijn I. Dröes & Martin Hoesli, 2024. "Housing Market Segmentation: A Finite Mixture Approach," De Economist, Springer, vol. 172(4), pages 291-337, December.
    • Handle: RePEc:kap:decono:v:172:y:2024:i:4:d:10.1007_s10645-024-09446-2
    DOI: 10.1007/s10645-024-09446-2
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10645-024-09446-2
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10645-024-09446-2?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Housing market segmentation; Hedonic model; Finite mixture model;
    All these keywords.

    JEL classification:

    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:decono:v:172:y:2024:i:4:d:10.1007_s10645-024-09446-2. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.