The Journal of Real Estate Finance and Economics
Volume 17, Issue 1, Article 4 (Abstract)
Title:	Analysis of Spatial Autocorrelation in House Prices
Author:	Sabyasachi Basu and Thomas G. Thibodeau
Abstract:	This paper examines spatial autocorrelation in transaction prices of single-family properties in Dallas, Texas. The empirical analysis is conducted using a semi-log hedonic house price equation and a spherical autocorrelation function with data for over 5,000 transactions of homes sold between 1991:4 and 1993:1. Properties are geocoded and assigned to separate housing submarkets within metropolitan Dallas. Hedonic and spherical autocorrelation parameters are estimated separately for each submarket using estimated generalized least squares (EGLS). We find strong evidence of spatial autocorrelation in transaction prices within submarkets. Results for spatially autocorrelated residuals are mixed. In four of eight submarkets, there is evidence of spatial autocorrelation in the hedonic residuals for single-family properties located within a 1200 meter radius. In two submarkets, the hedonic residuals are spatially autocorrelated in the remaining two submarkets. Finally, we compare OLS and kriged EGLS predicted values for properties sold during 1993:1. Kriged EGLS predictions are more accurate than OLS in six of eight submarkets while OLS has smaller prediction errors in submarkets where the residuals are spatially uncorrelated and the estimated semivariogram has a large variance.
Keywords:	hedonic house prices, spatial autocorrelation, semivariogram