16 Jun

Real estate pricing research provides evidence that properties potentially exposed to perceived or actual risks may experience price impacts. SPA's Looking Under the Hood reviews publications that illustrate the theoretical, methodological, and data challenges faced by scholars and practitioners studying detrimental conditions and their impacts on property values.

The following summary was drafted by Jason Borras. 

Airport noise and property values have been subjects of media attention since the construction of American Airlines hub at the Raleigh–Durham International Airport (RDU) in 1987. A more recent and significant expansion of passenger traffic led to 125 related lawsuits surrounding increased airport noise. While the lawsuits were settled, the defendant, RDU, provided an average of $14,400 in compensation to each homeowner in the area. Moreover, the implementation of airplane noise disclosure requirements for all residential purchase contracts in March 1997, lead to an influx of new lawsuits surrounding airport noise non-disclosure. Professor Jaren C. Pope (1) considered the events mentioned above and measured/quantified the effects of airplane noise to the Raleigh, North Carolina residential housing market. His analysis relied on hedonic output results from a fixed effect, semi-log, least squares specification. The author’s dataset of property sales, obtained from the Wake County Revenue Department included more than 16,856 single family residences (SFR) sales spanning from 1992 to 2000. Airplane noise contours and parcel level GIS using ArcView were obtained from the RDU.The regression output confirmed that airplane noise had statistically significant negative impact to SFR sale prices in Raleigh. For example, homes located within the 65–70 Ldn noise contour, sold for 5.1% less than unimpaired homes (control area transactions) within the one-mile control group area. Furthermore, homes within the 55–60 Ldn noise contour sold for 2.3% less than unimpaired homes. The author conclude that it is likely that market participants were not fully informed prior to the implementation of these disclosure requirements. 

  1. Pope, Jaren. (2008). Buyer Information and the Hedonic: The Impact of a Seller Disclosure on the Implicit Price for Airport Noise. Journal of Urban Economics. 63. 498-516.

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