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Environmental and Resource Economics

, Volume 68, Issue 2, pp 319–341 | Cite as

Housing Market Fluctuations and the Implicit Price of Water Quality: Empirical Evidence from a South Florida Housing Market

  • Okmyung Bin
  • Jeffrey Czajkowski
  • Jingyuan Li
  • Gabriele Villarini
Article

Abstract

In this study we utilize a hedonic property price analysis to examine changes in the implicit price of water quality given housing market fluctuations over time. We analyze Martin County, Florida waterfront home sales from 2001 to 2010 accounting for the associated significant real estate fluctuations in this area through flexible econometric controls in space and time. We apply a segmented regression methodology to identify housing market price instability over time, interact water quality with these identified market segmentations, and embed these interactions within a spatial fixed effect model to further account for any spatial heterogeneity in the waterfront market. Results indicate that water quality improvement is associated with higher property values. We find no evidence that the economic downturn crowded out concern for the water quality in this area. We further impute an implicit prices of $2614, evaluated at the sample mean, for 1 % point increase in the water quality grade.

Keywords

Hedonic price Housing market fluctuations Segmented regression  Spatial fixed effects Water quality 

JEL Classifications

D12 Q25 Q26 R21 

Notes

Compliance with Ethical Standards

Conflict of Interest

The authors declare that they have no conflict of interest.

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Copyright information

© Springer Science+Business Media Dordrecht 2016

Authors and Affiliations

  • Okmyung Bin
    • 1
  • Jeffrey Czajkowski
    • 2
  • Jingyuan Li
    • 3
  • Gabriele Villarini
    • 4
  1. 1.Department of EconomicsEast Carolina UniversityGreenvilleUSA
  2. 2.Wharton Risk Management and Decision Processes CenterUniversity of PennsylvaniaPhiladelphiaUSA
  3. 3.I.M. Systems GroupRockvilleUSA
  4. 4.306 C. Maxwell Stanley Hydraulics Laboratory, Department of Civil and Environmental EngineeringUniversity of IowaIowa CityUSA

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