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Historic District Influence on House Prices and Marketing Duration

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Abstract

Historic property designations have been lauded for spurring renovation beyond the historic structures themselves through positive externalities in surrounding neighborhoods. Previous historic district research focuses on whether historic designation results in a price premium. This paper takes a more comprehensive look at the buying process, which must consider marketing duration within the historic district as well as influences on the sale of properties adjacent to the historic district. We examine how historic district designation in Baton Rogue, Louisiana is capitalized either through a price premium or marketing duration and how that mechanism differs between neighborhoods inside and outside the historic district boundaries. We employ a three stage least square, 3SLS, model to account for the effects of endogenous marketing duration on price capitalization estimates. The estimates are consistent with search-market theory in that marketing duration absorbs part of the capitalization of historic designation. We find that the more certain benefits from historic designation within the district are reflected in a price premium while the reduced regulation coupled with the cachet of being located near but not inside the district result in shorter marketing duration.

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Notes

  1. Mason (2005) is a comprehensive survey of many strands of literature relating to the value of historic preservation, most of which point to positive net impacts of historic preservation.

  2. None of the studies that use repeat sales methodology models space-time interactions or uses constant-liquidity model. Thus, the marketing duration question reminds unanswered.

  3. See Sirmans et al. 2010 for a summary

  4. This possible cross equation correlation calls for estimating the two separate equations as a seemingly unrelated system—the same method appropriate for estimating systems of consumer demand equations. See Turnbull and Zahirovic-Herbert (2012) for a price-time estimation using seemingly unrelated regression.

  5. Haurin’s model offers an explanation for why houses with unusual attributes sell for less and take longer to sell (Haurin 1988, Jud, Seaks and Winkler 1996). To capture the property atypicality effects we use an alternative to this model that is presented in Turnbull, Dombrow and Sirmans (2006).

  6. Given the combination of sparse transactions within historic districts and our rich dataset, we use a hedonic model approach to minimize the limiting assumptions necessary in the alternative approaches such as repeat sales or difference-in-difference. In addition, our careful spatial controls for neighborhood composition and market conditions help to control for characteristics that may be correlated with historic designation.

  7. We have prepared a series of maps, but the number of overlapping census block groups, historic district boundaries, and the buffer zones around each of the district makes them difficult to read. However, they are available upon request.

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Authors and Affiliations

  1. The University of Georgia, 213 Dawson Hall, Athens, GA, 30602, USA

    Velma Zahirovic-Herbert

  2. Georgia State University, P.O. Box 3991, Atlanta, GA, 30302-3991, USA

    Karen M. Gibler

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  1. Velma Zahirovic-Herbert
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  2. Karen M. Gibler
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Correspondence to Velma Zahirovic-Herbert.

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Zahirovic-Herbert, V., Gibler, K.M. Historic District Influence on House Prices and Marketing Duration. J Real Estate Finan Econ 48, 112–131 (2014). https://doi.org/10.1007/s11146-012-9380-1

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