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While it is easy to establish cross-city differences in home prices and wages, a more ambitious research agenda seeks to decompose these price differences into objective amenity differences and identify the most important components of urban quality of life. For example, based on home price differentials around the world, several researchers have documented the importance of climate as an urban amenity. Recent studies

29. While this point would appear to be quite intuitive, consider this quote from Jared Diamond's Collapse: "Thus, environmental and population problems have been undermining the economy and quality of life in Southern California. They are in large measure ultimately responsible for our water shortages, power shortages, garbage accumulation, school crowding, housing shortages and price rises and traffic congestion" (2005, p. 503). If Los Angeles is truly such a mess, why is its population growing and home prices increasing? Diamond may be correct that this city could be even nicer if such congestion issues could be resolved (I will return to these issues in chapter 5), but the typical household compares Los Angeles as it is today to other alternatives, such as Houston or Detroit.

22 measuring urban environmental quality

Table 2-1. Home Prices across Major Metropolitan Areas, 1980 and 2000

Median prices in thousands of 1999 dollars

Table 2-1. Home Prices across Major Metropolitan Areas, 1980 and 2000

Median prices in thousands of 1999 dollars

Metropolitan statistical area

Value in 1980

Value in 2000

Atlanta

88.8

112.5

Baltimore

88.8

95.0

Boston

109.7

225.0

Chicago

130.6

137.5

Cleveland

109.7

112.5

Dallas

109.7

85.0

Denver

141.1

162.5

Detroit

88.8

112.5

Ft. Lauderdale

130.6

112.5

Houston

109.7

75.0

Kansas City

88.8

95.0

Los Angeles

198.6

225.0

Miami

120.2

137.5

Milwaukee

130.6

137.5

Minneapolis

130.6

137.5

New York City

109.7

187.5

Philadelphia

67.9

95.0

Phoenix

120.2

112.5

Pittsburgh

88.8

75.0

Portland

120.2

162.5

Riverside, Calif.

141.1

137.5

St. Louis

88.8

95.0

San Diego

177.7

225.0

San Francisco

198.6

275.0

Seattle

141.1

187.5

Tampa

88.8

95.0

Washington, D.C.

141.1

137.5

Source: Author's calculations based on the median self-reported home value for single detached homes with six rooms, using the Integrated Public Use Microdata Series database, which reports home values in categories. See Minnesota Population Center, University of Minnesota, "Integrated Public Use Microdata Series" (www.ipums.umn.edu/usa/ [May 2006]).

Source: Author's calculations based on the median self-reported home value for single detached homes with six rooms, using the Integrated Public Use Microdata Series database, which reports home values in categories. See Minnesota Population Center, University of Minnesota, "Integrated Public Use Microdata Series" (www.ipums.umn.edu/usa/ [May 2006]).

have documented the importance of temperate climate as a key determinant of cross-city real estate prices in both Italy and Russia.30 Perhaps not surprisingly, rents are lower in frigid Siberia than in Moscow, where it is merely extremely cold. Similarly, using census data from the United

30. Maddison and Bigano (2003); Berger, Blomquist, and Sabirianova (2003). The recent European Union expansion and labor market integration offer another interesting test of hedonic capitalization. As European Union integration continues, will home prices rise in European cities with more temperate climates relative to colder northern cities? Or, due to cultural and language barriers, will arbitrage opportunities persist such that lucky migrants can enjoy improved amenities without seeing their wages fall and rents rise?

States, Dora Costa and I show how the implicit price of climate has changed from 1970 to 1990.31 Housing prices are higher in cities with higher January temperatures, lower July temperatures, and lower rainfall throughout this entire period, but the differential has increased over time. In 1970 a person had to pay a premium of $1,288 a year (in 1990 dollars) to purchase San Francisco's climate rather than Chicago's. In 1990 this premium had risen nearly sixfold to $7,547 a year.

Within a major city, communities differ with respect to their quality of life. Some communities have low crime levels while others have high pollution levels. Denise DiPasquale and I use 1990 census microdata for Los Angeles to measure how much households pay for local public goods.32 In other words, home prices are regressed on neighborhood attributes, such as crime and pollution levels. This technique allows us to examine how much of a home's price is due to its structure versus the attributes of its local community. All else equal, home prices are 3 percent lower in communities where the Clean Air Act standard for ozone smog is exceeded an additional ten days a year.

Smog is not the only environmental "public bad" that people will pay to avoid. Using 1980 and 1990 data for all U.S counties, Kenneth Chay and Michael Greenstone found that a 10 percent reduction in total suspended particulates increased home prices by 3 percent.33 Similarly, when a hazardous waste site becomes eligible for a Superfund cleanup, median home prices nearby increase by 6 percent.34 In contrast, when a hazardous site is first marked as requiring a Superfund cleanup and placed on the National Priority List, homes close to the site decline in value. The marginal price of an extra mile of distance from the site peaks at $2,364 and declines to zero at a distance of 6.2 miles.35 Homes near industrial sites, commercial development, and sewage treatment facilities all sell at a discount whereas easy access to green space pushes house values up.36

31. Costa and Kahn (2003b).

32. DiPasquale and Kahn (1999).

33. Chay and Greenstone (2005). Cities and communities that offer high environmental quality are likely to have higher real estate prices for two reasons. First, the environmental quality will be positively capitalized into home prices. Second, high environmental quality areas tend to attract more educated residents. Urban researchers have documented that home prices appreciate in areas where the educated live (Rauch 1993; Bajari and Kahn 2005).

34. Greenstone and Gallagher (2005).

35. Kohlhase (1991).

36. Lee and Linneman (1998); Necheyba and Walsh (2005).

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How to Make Your Home Sell

How to Make Your Home Sell

In order to revive the nearly unprofitable real estate market it is important that more and more homes are staged. This is a simple concept that ensures that a particular house that is for sales find appeal with more and more buyers. Apart from getting a large number of buyers so that the seller can strike a good bargain, it is also equally important for the seller that his house gets sold of quickly. It is important to increase the demand so that the market can get more lucrative.

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