In this paper, we use quantile regression analysis to explore the role submarket competition plays in setting housing prices in those price ranges where different submarkets occupy homes of similar price. We find evidence of direct competition between submarkets with different preferences for at least some homes in a single neighborhood. By examining hedonic parameter instability at different housing price levels, we uncover not only latent diversity among homeowners but direct competition between them, which calls into question policy and market conclusions drawn from standard hedonic price models, especially large sample hedonic studies.
Authors: Michael C. Farmer and Clifford A. Lipscomb
Originally published in the Journal of Real Estate Research, Vol. 32, No. 4 (2010)