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A Statistical Learning Approach to Land Valuation: Optimizing the Use of External Information

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Abstract

We develop a statistical learning model to estimate the value of vacant land for any parcel, regardless of improvements. Rooted in economic theory, the model optimizes how to combine common improved property sales with rare, but more informative, vacant land sales. It estimates how land values change with geography and other features and determines how much information either vacant or improved sales provide to nearby areas through spatial correlation. For most census tracts, incorporating improved sales often doubles the certainty of land value estimates.

Suggested Citation

  • David Albouy & Minchul Shin, 2022. "A Statistical Learning Approach to Land Valuation: Optimizing the Use of External Information," Working Papers 22-38, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpwp:95084
    DOI: 10.21799/frbp.wp.2022.38
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    Cited by:

    1. Scott Wentland & Gary Cornwall & Jeremy G. Moulton, 2023. "For What It's Worth: Measuring Land Value in the Era of Big Data and Machine Learning," BEA Papers 0115, Bureau of Economic Analysis.
    2. McMillen, Daniel & Zabel, Jeffrey, 2022. "Special issue on land valuation: Introduction," Journal of Housing Economics, Elsevier, vol. 58(PB).
    3. repec:bea:wpaper:0209 is not listed on IDEAS

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    More about this item

    Keywords

    land values; hierarchical modeling; spatial data; Bayesian estimation;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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