On the Stability of the Implicit Prices of Housing Attributes: A Dynamic Theory and Some Evidence

Abstract

Given the dramatic fluctuations in aggregate housing prices, this paper attempts to examine whether the implicit prices of different housing attributes are “stable. ” Theoretically, this paper provides perhaps the first dynamic, general equilibrium model in which housing attributes ’ implicit prices fluctuate. Empirically, this paper models the time paths of different implicit prices as auto-regressive processes by employing a hedonic pricing model on a large set of housing transaction data over a relatively long period of time. An endogenous structural break test is then performed. Except for a few attributes, structural breaks are not detected. Directions for future research are discussed.